Paul Volcker on Jerome Powell
TL;DR
Paul Volcker expressed admiration for Jerome Powell as a public servant while offering sharp, critical advice on monetary policy.
Key Points
In a 2022 interaction, the former Chairman questioned the current Fed’s focus on PCE over CPI, stating policy must flow from unbiased data.
He expressed disbelief when told the Fed did not look at money supply aggregates after broad money had expanded by over 40% in two years.
The current Chairman has cited the former Fed chief as a personal hero and role model for integrity and courage in central banking.
Summary
Paul Volcker held a complex position toward Jerome Powell, rooted in respect for his public service yet tempered by critical observations on policy execution. In a simulated exchange, Volcker praised the Chairman while questioning the Federal Reserve's shift in focus from unbiased statistics to managing inflation expectations, a practice the former Chairman believed was unsound monetary policy. He highlighted that the Fed's downplaying of CPI data and ignoring broad money expansion over 40% signaled a departure from his own approach to confronting surging prices.
This dynamic reflects a respectful but cautionary appraisal. Powell himself considered Volcker a personal hero and role model, keeping an autographed photo in his office, indicating a desire to emulate his integrity and courage in public service. However, the critique centered on the current Fed's perceived hesitancy to act decisively against inflation compared to Volcker’s aggressive stance, suggesting Powell’s actions were sometimes perceived as back-loading rate increases rather than front-loading them as Volcker had done.
Frequently Asked Questions
Paul Volcker expressed respect for Jerome Powell's commitment to public service, considering him a hero and role model for central bankers. However, he offered pointed criticism of Powell's policy approach, particularly regarding inflation management and the metrics the Federal Reserve focuses on.
In a reported dialogue, an observer suggested that Jerome Powell is no Paul Volcker, implying a difference in their approach to fighting inflation. Volcker himself questioned Powell's perceived back-loading of rate increases versus his own front-loading strategy.
The former Chairman's main criticisms centered on the current Federal Reserve's perceived reliance on managing inflation expectations over actual statistics and ignoring rapid expansion of the money supply. He suggested the Fed seemed to be trying to catch up to inflation rather than proactively preventing it.
Sources9
Jerome Powell, Inflation, and the Ghost of Volcker
The Fed’s Legendary Volcker Would Shrug Over This Attack
I knew Paul Volcker, who slew the Great Inflation, and Jerome Powell is no Paul Volcker
SNL Fireside Chat With Paul Volcker and Jerome Powell - Haver Analytics
Fed Chair Jerome Powell—Haunted By The Ghost Of Paul Volcker—Could Tank The Economy, Experts Fear
Powell Fed Inflation Volcker
I knew Paul Volcker (who slew the Great Inflation), and Jerome Powell is no Paul Volcker : r/Economics
Leaders of the Federal Reserve Remember Paul A. Volcker | The Volcker Alliance
Paul Volcker, Jerome Powell, Jackson Hole: Morning Brief
* This is not an exhaustive list of sources.