The Powell punt

Despite his shortcomings, Jerome Powell should be reappointed Fed chairman

It would be a bad time to cast any doubt on the Fed’s independence

WHEN NOMINATING the chairman of the Federal Reserve, America’s president picks the person who wields the greatest immediate power over the global economy. Fed leadership brings with it control over American interest rates, responsibility for an $8.3trn balance-sheet and the obligation to regulate the world’s most important banks. A mistake in the Eccles building can throw millions out of work, roil global markets or unleash inflation. The Fed even props up offshore financial markets by offering foreign central banks a ready supply of dollars.

The fate of Jerome Powell, the incumbent chairman whose term expires in February, lies in President Joe Biden’s hands. It is unclear how history will view Mr Powell’s first term. Before the pandemic, his loose monetary policy helped unemployment reach historic lows without provoking inflation. When the economy locked down in the spring of 2020, the Fed prevented a collapse of financial markets with enormous and swift interventions, some of which, such as the implicit underwriting of the corporate-bond market, were unprecedented. In August 2020 the central bank fine-tuned its 2% inflation target, which it had hitherto mostly undershot, by making it apply on average over the economic cycle, meaning that the Fed would have to compensate for its past misses.

Recently, though, Mr Powell’s hand has looked less steady. By the measure the Fed targets, inflation has surged to 4% on a year earlier, or 6.4% if you annualise quarter-to-…