The Federal Reserve determines monetary policy in the United States, and its decisions reverberate through the entire world economy. Learn more about the Fed’s current chair, Jerome Powell, and his role in the Fed since being appointed in 2018 by President Trump.
Who is Jerome Powell?
Jerome Powell is the current chair of the Federal Reserve. A Republican who previously worked as a lawyer and investment banker in New York City, Powell was initially appointed to the Federal Reserve Board of Governors by President Obama in 2012. In 2018, Powell was appointed Chair of the Federal Reserve by President Trump, succeeding Janet Yellen.
Despite being criticized early in his term by President Trump, Powell has received bipartisan approval for his handling of the US economy through the COVID-19 pandemic. He’s also known for bringing heightened visibility to the Fed by increasing the number of public appearances taken compared to previous chairs.
Who appoints the Federal Reserve chair?
The chair is appointed by the US President from one of the seven members of the Board of Governors that make up the highest rank of the Federal Reserve. The Governors are also appointed by the President and serve staggered, 14-year terms limited to just one term.
The chair and vice chair are selected from the Board of Governors by the President and confirmed by the Senate. They both serve four-year terms in the leadership roles. The chair and vice chair can serve multiple four-year terms as long as their original 14-year term on the Board of Governors has not expired.
Jerome Powell’s nomination by President Obama to the Board of Governors was the first time in decades a President nominated a Governor from the opposing political party. Powell was nominated along with Jeromy Stein, a Democrat who the Republican-led Senate had already once rejected under Obama. Stein was nominated a second time along with Powell as a compromise between Obama and the Senate.
How much are the Federal Reserve Board and chair paid?
Jerome Powell’s salary as the chair of the Federal Reserve is $203,500. In 2019 the salary for the other seven board members on the Federal Reserve was $183,100. The salary for all members is set by Congress.
What is Jerome Powell’s net worth?
Powell is one of the wealthiest Federal Reserve chairs in history. His net worth is currently estimated to be between $17 and $55 million, according to financial disclosure documents at the time of his nomination as chair in 2019. He made most of his fortune as a partner at the Carlyle Group, a private equity firm where he worked from 1997 to 2005.
Before joining the Carlyle Group Powell worked in investment banking as the vice president at Dillon, Read & Co. from 1984 to 1990. A more comprehensive biography of Jerome Powell can be found at the bottom of this page.
What does the Federal Reserve do?
The Federal Reserve is the US central bank and was created in 1913 by Congress to ensure a safer and more stable financial system. President Woodrow Wilson signed the Federal Reserve Act on 23 December 1913.
The Federal Reserve’s main duties include:
- Controlling interest rates: The Fed willingly manipulates short-term interest rates, raising and lowering rates to slow or spur economic growth.
- Regulating banking institutions: The Fed sets standards of operations for all banks across the country through various regulations and policy guidelines.
- Protecting the credit rights of consumers: Some of the regulations set for banks by the Fed focus on protecting consumers through fair trading initiatives. Some of these regulations include the Fair Debt Consumers Protection Act (FDCPA) and the Truth in Lending Act (TILA).
- Maintaining a balanced economy: The Fed shrinks and increases the supply of money while also managing national bank reserves to encourage or reduce inflation.
- Providing financial services to the U.S.: The Fed maintains accounts for the U.S. treasury; collects federal taxes; and processes government checks, postal money orders, and US savings bonds.
Read more about the Federal Reserve, its duties, and its impact on the forex market.
What does the Federal Reserve chair do?
As Fed chair, Jerome Powell leads the Board of Governors of the Federal Reserve System and heads the central banking system of the United States. The chair provides leadership to the board and testifies before Congress twice per year to give updates regarding the Fed’s objectives and current monetary policy. Powell also regularly meets with the Secretary of the Treasury. However, the chair’s most important role is serving as the chair of the Federal Open Markets Committee (FOMC).
What is the Federal Open Markets Committee (FOMC)?
The FOMC is comprised of all seven members of the Board of Governors including the chair, the New York Reserve Bank president, and four other Reserve Bank presidents who rotate from the remaining 11 Reserve Bank presidents. Along with the New York Reserve president, they represent the 12 regional Reserve Banks across the United States.
The FOMC holds eight meetings per year at which the Committee reviews current economic conditions across the country and decides a short-term monetary policy in response. They also consider long-term obstacles to maintaining or achieving price stability and steady economic growth.
Monetary policy set by the FOMC is guided by what’s known as the ‘Dual Mandate,’ which sets goals for both stable pricing and maximum employment across the country. Specifically, the committee strives for an inflation rate of 2% and an unemployment rate around 4%.
What has Jerome Powell done as Fed chair?
While the COVID-19 pandemic gave Powell a unique challenge in his first term as chair, he was already shaking up the Fed before the crisis emerged.
Powell surprised many by aggressively seeking to demystify the department. Since his appointment in 2018, he has made considerably more media appearances than past chairs. He’s also known to regularly meet with members of Congress, making him one of the most popular Fed chairs ever on Capitol Hill.
Drawing sharp criticism from President Trump, Powell steadily raised interest rates during his first year in an attempt to keep inflation from rising above 2%. However, Powell ultimately began cutting interest rates in response to economic uncertainty spurred by the trade war with China.
Once COVID-19 became a global pandemic, Powell slashed the interest rates effectively to zero. The cuts were controversial at the time, but Powell has since been praised by both Republicans and Democrats for avoiding a full economic meltdown during the pandemic.
As pandemic restrictions continue to ease in the U.S., Powell says he intends to keep interest rates at effectively 0% and is not too concerned with the recent rise in inflation. Powell claims he does not expect the rise in inflation to grow much further, and lowering unemployment is still a main priority of the Fed.
While Powell’s first four-year term as chair will end in January 2022, he is highly favored by analysts to be appointed for a second term by President Biden. Whether he is reappointed or not, Powell has guided the Fed through unprecedented times and made many decisions likely to create lasting change at the Fed.
Will Jerome Powell be reappointed as Fed chair?
Most economists predict Powell will be reappointed by President Biden in 2022 because of his deft handling of the COVID-19 pandemic and recent comments on not raising interest rates. However, the current President could copy President’s Trump move and appoint a new chair who is like Powell in all ways except party affiliation. Lael Brainard is currently the only Democrat on the Board of Governors. President Biden is expected to make his decision by Labor Day.
Jerome Powell biography
Powell was born in 1953 in Washington, D.C. He received a Bachelor of Arts in politics from Princeton University in 1975. After graduation he spent one year as a legislative assistant to Republican Pennsylvania Senator Richard Schweiker before earning his Juris Degree from Georgetown University in 1979. There he was the Editor in Chief of the Georgetown Law Journal.
In 1979 Powell moved to New York City where he clerked for Judge Ellsworth Van Graafeiland of the U.S. Court of Appeals for the Second Circuit. Powell then worked as a lawyer first at Davis Polk & Wardell and then Werbel & McMillen.
Powell began working at the investment bank Dillon, Read & Co. from 1984 to 1990 where he became vice president and was approached to work for George H. W. Bush’s administration.
After being approached by the Bush administration, Powell became the Under Secretary of the Treasury for Domestic Finance from 1992 to 1993. Powell briefly returned to Dillon, Read & Co. before becoming a partner at The Carlyle Group from 1997 to 2005.
Leaving Carlyle, Powell founded the private investment firm Severn Capital Partners and became a managing partner of the Global Environment Firm. Powell also spent time as a visiting scholar at the Bipartisan Policy Center think tank from 2010 to 2012.
In 2012 Powell was nominated to the Federal Reserve Board of Governors by President Obama and confirmed by the Senate. In 2018 Powell was appointed chair of the Federal Reserve by President Trump.
Because of Powell’s long history as an investment banker and venture capitalist, he is one of the richest Fed chairs in history.