- [Narrator] When Fed Chair Jerome Powell speaks.
- Today, the FOMC raised its policy interest rate
by a quarter percentage point.
- [Narrator] The markets move.
That's because the head of the US Federal Reserve
is the most powerful economic voice in the nation,
and Fed chairs can generally be put into two categories.
- Hawks are more worried about controlling inflation
and doves tend to be more worried
about making sure the employment market's strong.
- [Narrator] But Powell isn't one or the other.
Here's how Powell's mindset helped him rise
to the top and keep the Fed united.
The US Federal Reserve functions as a bank for banks.
- We look after the overall stability
of the financial system and we have tools to do that.
- Recently most Fed chairs have been academics or economists
so he's a little bit different
from the Fed chairs that we've had in the past few decades.
- He was never trained in formal economic modeling
but he's smart and he's got a great staff and he catches on.
- [Narrator] After a career in investment banking
and law in New York,
Powell left to become an undersecretary at the Treasury.
- Speaking for myself, that accounted in large measure
for my own conduct at the meeting,
which was to be fairly passive.
- [Narrator] In 2012, he joined the Fed's Board
of Governors to help guide the organization.
- He has a fine reputation.
He should be a fine member.
- [Narrator] But his practical experience
in finance gave him a different skillset.
- Powell hasn't been preparing his whole life
to be Fed chair.
He hasn't been part
of this priesthood of monetary policy theorists
and so that's brought different strengths
and weaknesses for him in the job.
- He watches the data.
He listens to what economists and modelers say
and what financial market people are saying
but not what politicians are saying.
- [Narrator] His prioritization of data,
not economic models has meant
that he's not always a hawk,
economic shorthand for those
who prioritize fighting inflation,
and he's not always a dove,
taking action to boost employment.
- He's a pragmatist. He's a realist.
He's not an ideologue, and so he's going to change his mind
when he sees the facts on the ground changing.
- [Narrator] And things certainly changed in March 2020.
- [Reporter 1] The toll is growing by the hour.
- [Reporter 2] Major retailers are also going dark.
- It doesn't seem fair
that people should lose everything they have,
including their homes over this.
- [Narrator] Powell's data-driven mentality
was guiding the largest economic stimulus plan
ever undertaken in the US.
- At that point, the whole Federal Reserve board,
certainly including Jay Powell
are leaning very strongly in the dovish direction.
- The Fed can also contribute in important ways
by providing a measure of relief and stability
during this period of constrained economic activity
and by using our tools to ensure
that the eventual recovery is as vigorous as possible.
- [Narrator] In his response to the emergency,
Powell stretched his power farther
than Fed chairs had done before.
- He got after his staff, he said,
"We're falling behind this thing."
He said, "It feels like we're swimming after a speedboat."
He encouraged them to really get on top of this
and they just announced a bunch of stuff
this one weekend of March 2020.
- [Narrator] He instructed the Fed to begin a torrent
of bond-buying programs to stabilize markets
and slash interest rates.
That month, it bought Treasury and mortgage securities
at a pace of nearly $75 billion a day.
- The criticism on Powell has been
that maybe he overreacts to the problem at the moment,
so you kept interest rates too low
when maybe you should have been more concerned
about the risk of an inflation shock.
- [Narrator] That risk became a reality.
Fed holdings had reached $9 trillion
and inflation had hit a 40-year high.
- As Americans well know it remains painfully high.
- [Narrator] Powell had to pivot again
and tried to keep the Fed's rate-setting committee
or FOMC voting together to get policy passed.
He began acting as a hawk to bring down inflation.
- But everything that economists thought they knew
about inflation in 2021 turned out to be pretty wrong.
- It's not going to be, we don't think smooth.
It's probably gonna be bumpy.
- I think at a time like this,
we're very fortunate to have somebody
with the temperament of Jay Powell, who listens to people,
understands different points of view,
distills the different pieces of information that come in
to the Fed and makes considered judgements about what to do
and then goes and persuades people that maybe on one extreme
or the other extreme to come
into the center and go along with the consensus.
- [Narrator] Powell kept the hawks and doves united
with only one dissenting vote
against rate raises since the end of 2021.
- A lot of the people I talked to say that he's very good
at taking people's concerns seriously,
making them feel like they're being listened to,
figuring out what a reasonable compromise position might be
and that I think explains why he's been able
to keep the committee so united
during this pretty difficult stretch.
- Everything we do is in service to our public mission.
We at the Fed will do everything we can
to achieve our maximum employment and price stability goals.
- [Narrator] As he confronts
an uncertain economic landscape,
his empirical mindset will continue to be tested.
- How we look back on Powell's tenure
as chair really depends on what happens
with inflation and the economy over the next two years.
- How well did he handle this uncertain period?
What did the economy look like in 2024 and 2025?
That history is yet to be written
and I think future historians
of the Fed will judge him strongly on how that looks.
(pensive music)