Jay Powell's tenure as Federal Reserve chair was ultimately a failure on the central bank's most important mission—keeping inflation low—according to a new commentary published by the Cato Institute on May 20, 2026, as Powell's term comes to an end. While the outgoing Fed chair deserves praise for resisting political pressure from President Trump, his track record on price stability fell short, according to Ryan Bourne, the commentary's author. The analysis argues that grading Powell primarily on defending Fed independence while ignoring his inflation record is like praising a goalkeeper for standing up to his manager while overlooking the goals he let in.
The Fed's preferred inflation gauge hit 7 percent before the central bank tightened policy meaningfully in spring 2022, delivering the worst inflation in four decades. The Federal Open Market Committee eventually lifted interest rates by 5.25 percentage points over 16 months, and inflation fell gradually to 2.3 percent by spring 2025 without an unemployment spike. The commentary notes it might have drifted toward the Fed's 2 percent target but for Trump's tariffs and foreign policy moves.
According to Bourne, Powell's Fed famously thought inflation was "transitory" and would quickly dissipate, mistaking capacity constraints driven by excessive demand for genuine supply shocks. The report states that as late as November 2021, the Fed was still treating inflation as largely transitory, expecting supply constraints to ease and inflation to fall back as the pandemic economy normalized. The commentary argues that while genuine supply shocks—including the pandemic, America's protectionist turn, and conflicts in Ukraine and Iran pushing up energy prices—exacerbated inflation's peak, it was monetary policy accommodating Congress's fiscal incontinence that drove almost all excess US inflation since 2021.
The analysis points to the Fed's 2020 framework review, overseen by Powell, as part of the problem. The Fed embraced "flexible average inflation targeting," saying that after periods of below-target inflation it would likely aim for inflation "moderately above" 2 percent for some time, while focusing on employment shortfalls from maximum employment. The commentary explains that this made the inflation target more discretionary, with no specified averaging period, no numerical definition of "moderately above," and no binding rule forcing the Fed to tighten when nominal spending surged. This framework was an artifact of post-2008 worries about insufficient monetary expansion, but it left the Fed fighting the last war when economic conditions shifted dramatically. The delayed response had real consequences: the inflation surge squeezed real wages, redistributed wealth arbitrarily, confused households confronting a permanently higher price level, and fed the ignorance and anger now spawning misguided price-control proposals.
The Cato commentary's bottom line is blunt: Powell "helped write the fire code, allowed the fuel to ignite, and arrived far too late with the hose". While defending the Fed's independence from political interference matters, the report argues that judging Powell primarily by his resistance to a president who deemed him an enemy lets him off too easily. His job wasn't just to preserve central bank autonomy or firefight high inflation after it arrived—it was to prevent the fire in the first place.