The chair of the Federal Reserve Board is the public face of the Federal Reserve Bank. Officially, the chair is the active executive officer of the Federal Reserve Board. The chair's main responsibility is to carry out the mandate of the Fed, which is to promote the goals of maximum employment, stable prices, and moderate long-term interest rates.
The Fed is composed of 12 Federal Reserve banks located in regions around the United States. The banks of the Fed carry out the day-to-day operations and policies of the Fed.
- The chair of the Federal Reserve Board is the active and most visible executive officer of the Federal Reserve Board.
- The chair provides leadership and executes the mandate of the central bank, pushing for maximum employment, stable prices, and long-term interest rates in the moderate range.
- The chair and vice-chair are both chosen by the president from among the seven members of the Board of Governors and then confirmed by the Senate; both initially serve a four-year term and can be reappointed.
- The chair is also the chair of the Federal Open Markets Committee (FOMC) and is responsible for determining short-term U.S. monetary policy.
Fed Chair Jerome Powell
Jerome H. Powell took over the role of chair on Feb. 5, 2018. He has served as a member of the Board of Governors since 2012. Powell was previously a partner at The Carlyle Group, a private investment firm, and served as an assistant secretary and undersecretary of the Treasury during the administration of President George H.W. Bush. He was reappointed to the office on May 23, 2022, and his term on the board ends on Jan. 31, 2028.
Mr. Powell serves as the chairman of the Federal Open Market Committee (FOMC), a monetary policymaking body. The committee is made up of 12 members and has eight scheduled meetings each year to determine policy. These meetings are highly anticipated events in world markets.
Jerome Powell was born in February 1953 in Washington D.C., receiving an AB in politics from Princeton University in 1975, which was followed up soon after by a law degree from Georgetown University in 1979. He was editor-in-chief of the Georgetown Law Journal while attending the university.
Before he was appointed, he was a visiting scholar at the Bipartisan Policy Center in D.C. There, he focused on both federal and state fiscal issues. The position of chair was previously held by Janet Yellen, who took over the post in 2014 under President Obama.
Appointment of the Chair
The chair is picked from one of the seven members of the Board of Governors. As set forth in the Banking Act of 1935, the president appoints the seven members of the Board of Governors, who are then confirmed by the Senate.
Members of the Fed serve staggered terms of 14 years and may not be removed for their policy opinions. The president nominates a chair and vice-chair, both of whom the Senate must also confirm. The chair and vice-chair are appointed to four-year terms and can be reappointed, subject to term limitations.
Duties of the Chair
By statute, the chair testifies before Congress twice a year on issues that include the Fed’s monetary policy and objectives. The chair also meets regularly with the secretary of the Treasury, who is a member of the president's Cabinet.
The Board of Governors (as of June 1, 2022) has one vacancy on its seven-member board, which is for the Committee on Economic and Monetary Affairs.
One of the chair's most important duties is to serve as the chair of the Federal Open Markets Committee (FOMC), which is critical in setting short-term U.S. monetary policy. The chair's salary is set by Congress.
The Federal Open Markets Committee (FOMC)
The FOMC meets eight times a year and is composed of the seven members of the Board of Governors along with five reserve presidents of the Fed. The president of the New York reserve bank serves continuously while the other four bank presidents rotate regularly.
The FOMC determines near-term monetary policy at its meetings. Its main monetary tools are the federal funds rate, the discount rate, and the buying and selling of government securities.
How the Federal Funds Rate Works
The federal funds rate is the interest rate at which member depository institutions lend each other money held at the Fed overnight. It is the key interest rate for the U.S. economy because it is the base rate that determines the level for all other interest rates. A higher federal funds rate makes it more expensive to borrow money.
The effects of the COVID pandemic forced the FOMC to lower the federal funds rate to 0.25%, which is effectively zero, at its meeting on March 15, 2020, from a rate of 1% to 1.25% set on March 3, 2020. The last time the rate was so low was during the 2008 financial crisis. In 2022, due to growing inflation, the Fed increased rates on March 17 and May 5, with target ranges between 0.25% and 0.50%, and 0.75% and 1%, respectively.
Post-2008 Federal Funds Rate
The FOMC kept the federal funds rate at 0.25% for seven years after the crisis to increase the money supply and help achieve the Fed's official mandate. As the economy recovered, the FOMC began raising rates again in late 2015.
Between December 2015 and December 2018, the FOMC raised the fed funds rate one-quarter percentage point at a time, from 0.25% to 2.50%. The last time the rate was at 2.50% was in December 2018.
On Jan. 26, 2022, the FOMC kept rates near zero, but Fed Chair Jerome Powell said "the committee is of a mind to raise the federal funds rate at the March  meeting assuming that the conditions are appropriate for doing so."
On March 16, 2022, it was announced that the Fed would increase rates to a target between 0.25% and 0.50%. Then, on May 4, 2022, it was announced that rates would be increased further to a range between 0.75% and 1%. The reason for the rate increases was to combat the rapidly rising inflation.
The discount rate is the interest rate charged to banks that receive loans from regional Federal Reserve Banks. It is also known as the discount window. There are three types of discount windows: primary credit, secondary credit, and seasonal credit.
The FOMC also buys and sells government treasuries to increase and decrease the money supply as necessary. The Fed undertook the largest economic stimulus in history during the 2008 financial crisis by buying massive amounts of U.S. Treasuries and mortgage-backed securities (MBS). The program, called quantitative easing (QE), added around $3.5 trillion to the Fed’s balance sheet. This program ended in 2014.
However, quantitative easing was once again used as a key tool amid the coronavirus pandemic. The Fed purchased Treasuries and mortgage-backed securities (MBS). In November 2021, it began tapering its quantitative easing asset purchases and at the Jan. 26, 2022 meeting, said it still plans to cease purchases in March 2022. In May 2022, it announced plans for reducing the balance sheet.
How Long Is the Federal Reserve Chair's Term?
The Federal Reserve Chair's term is for four years. They are nominated by the President of the United States and this appointment is then confirmed by the Senate; however, unlike the Presidency, the Fed chair can serve more than two terms (William McChesney Martin served from 1951 to 1970).
Does the President Have Power Over the Fed Chair?
The President has some power over the chair, but it isn't direct. The President nominates the chair and is permitted to be vocal about the direction of the Fed, but the President cannot direct the Fed to raise or lower interest rates. Members of the Board of Governors of the Fed serve 14-year terms, which obviously has some presidential overlap and keeps the Board independent.
Who Was the Fed Chair During the 2008 Financial Crisis?
Ben Bernanke was the chair during the 2008 crisis. His tenure was characterized by a long period of quantitative easing and promoting transparency within the committee.
Who Was the First Female Chair of the Federal Reserve?
The first female chair of the Federal Reserve was Janet Yellen, who served from 2014 to 2018. She is also the first female to hold the office of the Secretary of the Treasury.
The Bottom Line
The chair of the Federal Reserve, Jerome Powell, is responsible for carrying out the directives of the Federal Reserve. This can include meeting and testifying before Congress, monitoring and managing interest rates, and promoting maximum employment.
Although the Fed chair is an enormously powerful position, there is no direct order that is taken from the President as the Fed is independent. The chair is considered one of the most powerful positions in the entire world, and any change to long-term interest rates has a pronounced economic effect that ripples through all world markets.