It’s never easy being a central banker. Too many of us, with the benefit of hindsight, look back and proclaim judgment on policies they took (or didn’t take) often forgetting that the future is never easy to predict. I am by no means innocent of this charge. I take potshots at central bankers all the time without consideration of the difficulty of their jobs.

Even the most revered central banker in history, Paul Volcker, was only admired years later.

Amid his administering the harsh medicine to stop spiraling inflation, there were howls of protest from the public who were being squeezed by the high cost of money. And by no means was Wall Street all-aboard either. Here are some of Volcker’s own recollections of the period from a 2013 NBER interview:

I decided we had to change the play book a little bit and we threw everything we could into the October 1979 announcement. I had this naive hope, I knew the short-term rates would go up, but I thought, “Ah, we will instill confidence and long-term rates will not go up.” Long-term rates went up, too, just about as much as the short-term rates, which was a disappointment. But it showed how strong the psychology was.

…raising interest rates quite visibly and openly is not the easiest thing in the world for central bankers or anybody. It’s much easier to lower interest rates than it is to raise interest rates, I think it’s fair to say, in almost any circumstances. That 4-3 vote that I referred to reflected something of that reluctance.

Although Volcker is now almost universally lauded as a hero, back then consensus would have been closer to a bum. Change is always hard. And Volcker was definitely trying to change things. Human beings are not easily swayed from their ways and there is always a great deal of push back whenever the status quo is tossed out the window.

Powell’s plan

Why do I bring this up? The other day I was fortunate enough to have dinner with a new friend who presented his analysis of Fed Chairman Powell’s policies in a way that really struck a chord with me. When I describe it, you might not think it that novel, but what I liked was the way he extended his thinking past the immediate implications, and had thought through what it might mean over a longer time period.

I have adopted it as my own base case for Fed policy going forward.

There is a ton of anecdotal evidence concluding that Powell is not one to rock the boat. People that know him describe him as “steady” and someone to be counted on.

But what will that mean as a Fed Chairman? There is plenty of speculation about Powell being of a new breed of Fed leaders who won’t kowtow to Wall Street’s every whim. Yet there are also critics who argue he doesn’t have the stomach to reign in Wall Street’s excesses.