How Much Power Does The Fed Chair Really Have? - Beritaja

U.S. Federal Reserve Chair Jerome Powell speaks during a property convention astatine the extremity of a Monetary Policy Committee gathering successful Washington, D.C., connected Oct. 29, 2025. JIM WATSON/AFP via Getty Images

JIM WATSON/AFP via Getty Images

President Trump precocious nominated Kevin Warsh to go the adjacent president of the Federal Reserve's Board of Governors. And it's sewage america reasoning about the powerfulness of the Fed chair, and wherever that powerfulness comes from.

On insubstantial astatine least, the chair of the Fed doesn't look for illustration he aliases she should beryllium that powerful. The Federal Reserve Act, which created America's cardinal bank, established a bunch of limits connected the authority of immoderate 1 personification to style our economy.

The Fed chair, for example, only has 1 retired of 12 votes connected the Federal Open Market Committee (FOMC), the important decision-making assemblage that sets liking rates. One of 12! It's difficult capable for maine and a mini group of my friends to prime which movie to watch. I can't moreover ideate trying to person a mostly of eggheads — astatine slightest 7 — connected immoderate fancy committee what the due interest-rate argumentation should beryllium to execute the Fed's dual, sometimes-conflicting instruction of low, unchangeable ostentation and a beardown labour market. That said, the Fed chair evidently does much than conscionable effort and herd cats connected this important committee.

And, so, we've been wondering, is the Fed chair really that powerful? And, if so, why?

Princeton University economist Alan Blinder researches and teaches about the Fed (he's been a predominant guest connected Planet Money). Blinder served arsenic vice chair of the Fed backmost successful the mid-1990s. That's the Fed's number 2, correct down the caput honcho, who was past Alan Greenspan.

"He was the boss," Blinder says of Greenspan. And yeah, he says, Fed chairs really do person "a awesome deal" of power. "Now, you wouldn't study that by conscionable reference the Federal Reserve Act."

To understand the scope of this "great deal" of power, we first request to make clear what "the Fed chair" occupation really entails. The Fed chair is really the chair of two different bodies — the Board of Governors and the FOMC. They're appointed by presidents and confirmed by the Senate to beryllium the Chair of the Board of Governors for four-year terms. The committee is made up of six different members who are besides presidentially appointed and confirmed by the Senate (in staggered, 14-year position to safeguard the institution's independency from immoderate peculiar president).

The Board of Governors has a large master unit and oversees a bunch of important financial stuff, from banking supervision and financial regularisation to costs systems to economical investigation to the day-to-day operations of the Fed. That's 1 important area wherever the Fed chair exercises power.

But Fed chairs are — by tradition, not rule — besides the chair of the FOMC, which, again, is arguably the about important policymaking organ of the Fed because they're the group that makes the important decisions about liking rates. It's wherever about of the breathtaking action is. Each year, typically astatine their first gathering successful January, FOMC members ballot connected who will chair their important committee — and by long-standing tradition, they ever prime the Fed chair (they don't person to; much connected this successful a bit, because the truth that the president doesn't really name the caput of the FOMC could beryllium applicable if location was ever a conflict complete Fed independence).

It's true, Blinder says, that the Fed chair "only has 1 ballot retired of 12 connected the FOMC and could successful rule beryllium outvoted." However, successful practice, "it has ne'er happened successful the history of the Federal Reserve."

Wow. That's worthy repeating. On the important FOMC decisions about whether liking rates should spell up aliases down, the Fed chair has ne'er been outvoted!

Meanwhile, it's besides highly uncommon for the Fed chair to beryllium outvoted connected the Board of Governors.

David Wessel, a long-time economics journalist who now is head of the Hutchins Center connected Fiscal and Monetary Policy astatine the Brookings Institution, pointed to what seems to beryllium the past lawsuit wherever the Fed chair was outvoted connected the Board of Governors. That was nether the chairmanship of Paul Volcker, each the measurement backmost successful 1986 — the aforesaid twelvemonth the set Europe released "The Final Countdown" and group apparently thought it was cool to deterioration neon spandex and limb warmers. In different words, a agelong clip ago.

What explains the Fed chair's unthinkable way record?

Now, conscionable because the Fed chair has ever been successful the mostly astatine the FOMC and has almost ever been successful the mostly astatine the Board of Governors doesn't mean that they're dictating to these bodies what they should do.

That said, a recent moving study by Cooper Howes, an economist astatine the Fed, and 3 different world economists, analyzed FOMC gathering transcripts complete a fewer decades. And they recovered that the last argumentation determination that the FOMC made about liking rates lined up virtually "one-for-one pinch the Chair's preferred change." They reason that "while disagreement is pervasive among FOMC members, erstwhile it comes clip to make a decision, the Committee mostly follows the Chair's preferences." It confirms erstwhile findings from different economists and governmental scientists, including Chappell, McGregor, and Vermilyea (2005).

Gary Richardson, an economist astatine UC Irvine who served arsenic the first charismatic historiographer of the Federal Reserve System, says this grounds whitethorn overstate really all-powerful Fed chairs really are. He suggests that the Fed chair's unthinkable way grounds of triumphing successful committee votes whitethorn beryllium partially the consequence of a springiness and return betwixt them and the different committee members. Fed chairs, he suggests, publication the room successful the weeks aliases months anterior to charismatic votes and — seeking a statement — they reshape their ain argumentation preferences successful anticipation of what they cognize different committee members will want.

We were funny what group who served connected the Board of Governors and FOMC had to opportunity about this statement complete the Fed chair's power complete votes.

Lael Brainard served arsenic a personnel and past vice chair of the Board of Governors betwixt 2014 and 2023, nether the activity of Fed chairs Janet Yellen and Jerome Powell. She says it's existent that FOMC members could power the Fed chair's argumentation preferences done their nationalist speeches, conversations, and truthful on.

But, successful her experience, erstwhile it came adjacent to the FOMC meeting, the chair usually had clear preferences for what they wanted the Fed to do. They would telephone her and different members connected the telephone successful the run-up to FOMC meetings to get a consciousness of what they were reasoning and really they would apt ballot connected the chair's projected actions. However, they didn't do this pinch "a blank slate," she says. "It was really about getting group connected committee pinch their preferences." In different words, they lobbied the FOMC to get what they wanted.

Lael Brainard takes the oath of agency arsenic vice chair of the Federal Reserve connected May 23, 2022, successful Washington, D.C. Drew Angerer/Getty Images

Drew Angerer/Getty Images

Blinder had a akin communicative about Alan Greenspan. "He had patient opinions about of the time," Blinder says. "He fto you cognize what those opinions were earlier you voted, truthful it wasn't for illustration everyone's gonna ballot and then, 'Oh, Greenspan had a different view.' No, he fto everybody know. And truthful the prime you had erstwhile it came clip to ballot was whether you were gonna defy this profoundly respected and exalted president aliases spell on pinch him, moreover if you didn't rather work together pinch him."

In short, each the sources we said to agreed that the Fed chair exercises a ton of powerfulness complete some the FOMC and the Board of Governors, moreover though overmuch of that powerfulness can't beryllium recovered formally written down successful the law.

So wherever does the Fed chair's powerfulness travel from?

So why, if the Fed chair is only 1 of galore votes successful a important financial institution that shapes our economy, does he aliases she look to person truthful overmuch powerfulness complete it? There are astatine slightest a fewer important reasons.

First, the Fed chair has powerfulness complete the Fed's communications. Fed chairs are the ones who clasp the important property conferences. They are the ones, who, by law, attest earlier Congress. They are the "most visible fig astatine the Fed," Wessel says. Call it the economical bully pulpit.

Imagine a Fed chair going successful beforehand of microphones and cameras, and saying thing like, "Inflation is retired of control, and there's thing we could do about it." Markets would spell bananas. People would beryllium crying about their 401Ks. There would beryllium pandemonium connected Wall Street. Fed chairs speak for their institution, and that institution really matters for the economy. Their mouths person powerfulness — and the different committee and committee members cognize it. That whitethorn beryllium 1 logic why they thin to defer to the Chair.

Second, the Fed chair isn't conscionable the chair. He aliases she is efficaciously the Fed's CEO, says Richardson. That is spelled retired successful the law: the Federal Reserve Act says the chair is the Fed's "active executive officer." And conscionable for illustration immoderate different CEO, the Fed chair has wide authority complete day-to-day guidance — including important power complete hiring, firing, and promotions among the Fed's staff. They are the staff's boss. And that authority could thief Fed chairs style which data, analyses, and reports different Fed authorities spot erstwhile they ballot connected important matters.

In the tally up to FOMC meetings, Brainard says, committee members are fixed what's known arsenic "The Tealbook." Basically, it's a report, put together by the Fed's economists, that contains data, charts, and deep-dive analyses about the guidance of the system that are applicable for the votes FOMC members person to make.

Brainard says this study was ever ace high-quality. It's not for illustration Fed chairs get unit to navigator the books aliases thing for illustration that. The information is real. "But the information lends itself to different interpretations, peculiarly astatine turning points successful the economy," she says. And the measurement the information is presented could sometimes matter. Through their sway complete the staff, the chair could usage the Tealbook and different unit reports to power really members vote.

Being the Fed's main executive besides gives the Fed chair the powerfulness to make mini decisions, for illustration "who gets parking, and who gets to parkland where," Richardson says, and large decisions, for illustration who serves connected which committees. In that recent study by Howes and colleagues, they hypothesize that FOMC dissenters are met pinch "punishment" by the chair that reduces their power successful the institution. In different words, the chair has immoderate carrots and sticks that they whitethorn usage to nudge members successful directions they want.

Additionally, Fed chairs thin to service overmuch longer connected the Board and FOMC than different members. While Governors could service up to 14 years connected the Board, about walk overmuch little clip than that. The longer tenure, Richardson says, whitethorn summation the chair's gravitas and organization knowledge, and it whitethorn beryllium different logic why Board and FOMC members defer to them.

Third — and importantly — the Fed chair sets gathering agendas, including projected argumentation actions. "The  Federal Open Market Committee meetings and the Board meetings are not conscionable free-for-alls wherever anybody brings up thing they want," Blinder says. "There's an agenda, and they instrumentality to the schedule — and the schedule is group by the chair."

One salient illustration of why schedule power matters came aft the 2008 financial crisis, erstwhile Ben Bernanke was Fed chair. Basically, the Fed trim liking rates each the measurement to zero — and past it couldn't push them immoderate little to stimulate the economy. The Fed's accepted limb had mislaid its power. So Bernanke had to create and put connected the schedule an wholly new, unconventional limb — "Quantitative Easing" (QE) — to effort and get the system increasing again (QE was fundamentally the Fed buying a boatload of mortgage-backed and different securities to effort and push down longer-term liking rates).

Bernanke was uniquely qualified to lead this agenda, because he had spent years studying things for illustration the Great Depression arsenic good arsenic Japan's much caller struggles pinch near-zero liking rates, which were instances wherever cardinal banks recovered their accepted argumentation levers nary longer worked.

Federal Reserve Chairman Ben Bernanke participates successful a property briefing astatine the Federal Reserve building, connected June 22, 2011, successful Washington, D.C. Mark Wilson/Getty Images

Mark Wilson/Getty Images

Wessel had a nosy measurement of describing this. " One measurement to deliberation about it is Ben Bernanke was for illustration the feline who was studying dinosaurs, and everybody said, 'Well, that's intellectually interesting, but who cares?' And past 1 time connected the horizon, a Tyrannosaurus Rex shows up — and they were like, 'Well, convey God the feline successful complaint knows thing about dinosaurs.'"

This gave Bernanke other gravitas. And, mixed pinch his organization authority and powers — he was capable to put unconventional monetary policies connected the agenda. While those policies proved to beryllium controversial, he was capable to person beardown majorities connected some the Board of Governors and the FOMC to prosecute them during a clip of crisis. (Side Note: Trump nominee Kevin Warsh erstwhile served connected the Fed Board and the FOMC. He voted for early rounds of QE, but later became an influential professional of the policy).

Finally, and relatedly, the Fed chair has shown an unthinkable powerfulness to build statement wrong the decision-making bodies of the Fed. We alluded to this earlier erstwhile we shared the unthinkable truth that the Fed chair has ne'er been outvoted connected the FOMC and has seldom been outvoted astatine the Board of Governors.

One large logic for this consensus, Blinder says, is simply a contented of deferring to the chair. "The belief connected the Fed is that it's damaging to the institution to defy the chair."

Brainard agreed that there's an organization norm connected supporting the chair, particularly successful difficult moments for the economy. "There is — for group for illustration myself —  a desire to show immoderate unity and support for the chair — moreover if you mightiness person humble differences successful position of wherever you deliberation that result should be," Brainard says.

Fed officials are nationalist servants, and they cognize their actions and words could person immense effects connected the economy. The Fed is about powerful and effective erstwhile it speaks pinch 1 voice. Speaking pinch 1 sound is simply a clear and powerful awesome to markets, and officials for illustration Brainard person deferred to the chair because they judge it helps "shore up the spot and credibility of the institution."

For example, Brainard says, backmost successful 2015, erstwhile she was caller connected the Board of Governors, she faced a difficult determination about whether to support raising liking rates. Fed Chair Janet Yellen had "put successful spot a batch of communications and activity to hole to raise rates for the first clip since the Great Financial Crisis," Brainard says. At the aforesaid time, markets were looking a tad spot shaky. "So I thought it was the incorrect infinitesimal to raise rates," she says. "But because it was truthful important that it was the first liking complaint emergence since the Great Financial Crisis, I thought it was very important to show solidarity and support of the chair, defer to her judgement and move guardant pinch that."

Part of this inclination of members to defer to and support the chair depends connected who is really selected to service successful these positions. For example, President Trump appointed Stephen Miran past year, and since past Miran has defied the contented of statement and go a accordant dissenting ballot against Chairman Jerome Powell, pushing the Fed to much forcefully trim liking rates.

A caller Fed chair

So, yeah, historically, the Fed chair has really mattered for the actions of America's cardinal bank. But overmuch of their authority boils down to a benignant of soft power, which is simply a merchandise of tradition, norms, and the societal and governmental dynamics of serving successful these bodies. In utmost circumstances — like, say, if a president tried to portion the Fed of independency and forced them to prosecute inflationary policies — that could change.

"The president depends connected the loyalty and respect of the different group connected the FOMC," Wessel says. "And if we had a president who was really retired to lunch, past I deliberation we would study the chair's powerfulness is constricted  by his expertise to bid the respect of the committee.  So the situation that each caller Fed chair has coming successful is that the institution is loyal to the chair. They springiness you the use of the doubt, but if it turns retired that they deliberation you're nuts aliases irresponsible, they could move connected the chair and make it intolerable for him to get his way."

In different words, wrong the soul building of the Fed lies a dormant powerfulness that could beryllium awakened.

Over overmuch of the past year, President Trump has been pressuring Jerome Powell to little liking rates and galore judge it's not a coincidence that there's now a national criminal investigation of costs overruns successful a awesome Fed building renewal task pursued nether his tenure. Indeed, Jerome Powell released a connection and said, "The threat of criminal charges is simply a consequence of the Federal Reserve mounting liking rates based connected our champion appraisal of what will service the public, alternatively than pursuing the preferences of the President." Trump has besides sought to fire Biden appointee Lisa Cook from the Board of Governors. It's each been beautiful unprecedented, and, wrong that context, the nuances of the Fed's building person gotten much focus.

For example, the truth that the Fed chair doesn't, by law, person to beryllium the caput of the FOMC was cited by immoderate observers arsenic a imaginable measurement for the Fed to safeguard their independency and conflict President Trump's push to get them to little liking rates. Many fearfulness that handing the Fed's powerfulness to President Trump — or, really, any president — would yet consequence successful worse ostentation and beryllium damaging to the system (check retired this Planet Money Spotify playlist of episodes about Fed independence).

Jason Ma, writing complete at Fortune, stressed that Jerome Powell's word arsenic Fed Governor ends successful 2028, and, moreover if he was replaced arsenic Fed chair by a Trump state who wanted to push rates to the floor, it would beryllium imaginable for Powell to proceed serving arsenic FOMC chair and bid the basal mostly to conflict that.

However, President Trump's caller information of Kevin Warsh seems to person tamped down connected this talk.

" This position of a imaginable civilian warfare connected the FOMC has been greatly diminished by the information of Kevin Warsh," Blinder says.

That's because Warsh antecedently served connected the Fed's Board of Governors and FOMC, has a way grounds of caring a batch about runaway inflation, and he's good respected. Plus, Blinder says, he's personable and isn't the type of personification who would bang connected the array astatine FOMC meetings.

Kevin Warsh (to the left), past a Fed official, talks pinch then-EU Finance Minister Elena Salgado during the G-20 meetings successful 2010. Chung Sung-Jun/Getty Images

Chung Sung-Jun/Getty Images

For many, Trump's action of Warsh was surprising, considering the president has been urging a much dovish stance astatine the Fed for importantly little liking rates — and Warsh has a estimation arsenic an ostentation hawk.

That said, cipher knows what benignant of conversations Warsh has had pinch President Trump, whether he would person a stiff backbone successful the look of statesmanlike pressure, and what decisions Warsh will yet make if he gets approved by the Senate and takes the large job.

One point is for judge though: the occupation he does will importantly matter for each of us.