The Fed wants to hit its inflation target. Why it might not get to.

The theme of Stanford’s Hoover Institution monetary policy conference last week was “finishing the job," a nod to the Fed’s ongoing struggle to bring inflation down to 2% while easing interest rates. But the job, as it turns out, may be unfinishable. And the institution trying to complete it may soon be reshaped.

Behind the genteel panels and policy jargon, one thing was clear: The Greenspan-to-Powell era, a 30-year arc of central bank activism, could be nearing its end. What comes next is a narrower, more restrained version of the Fed that could break with recent precedent on everything from balance sheet strategy to its very purpose.

The Fed’s intellectual tool kit—the framework guiding how it interprets data and steers the economy—is under scrutiny. And everyone is a critic.

James Bullard, dean of Purdue University’s Daniels School of Business and former president of the St. Louis Fed, argues that the traditional model of managing inflation in a world of “sticky" prices no longer reflects reality. Prices now adjust quickly, he said, while contracts remain rigid. The Fed’s mission, then, should go beyond stabilizing inflation and to ensuring money is predictable enough to support those contracts.

Jason Furman, a former top White House economist, sees a different problem. The Fed, he says, relies on an ever-shifting mix of indicators, leaving markets and the public guessing. He advocates for a clearer framework, while others argue the central bank should lean more heavily on rule-based approaches like the Taylor rule, rather than reacting to data in real time.

Inside the Fed, some are calling for internal reforms. Cleveland Fed president Beth Hammack has urged a re-examination of how the Fed uses its balance sheet, including the long-term implications of quantitative easing and tightening. Her predecessor, Loretta Mester, believes policy decision memos have become too terse, pushing investors to read too much into Chair Jerome Powell’s every word.

Powell came into the role as a pragmatic centrist, but history thrust him into the role of economic firefighter. He slashed interest rates to zero during the Covid crisis and oversaw an enormous expansion of the Fed’s balance sheet to calm markets. After underestimating early inflation signals, he pivoted—sharply raising rates at the fastest clip in decades.

Now, the Fed has made progress, inflation is falling. But President Donald Trump’s tariff and policy shocks threaten to reverse that trend. Core CPI could rise to 3.5% by year’s end, warned Capital Economics’ Stephen Brown. Apollo Chief Economist Torsten Slok predicted a stagflation-lite environment with rising prices, slowing growth and limited Fed control.

Powell is guiding markets, still trying to land the so-called plane. But with his term expiring next May, and President Donald Trump expected to nominate a successor as early as this fall, the Fed may not reach the runway before the crew is replaced.

Powell’s successor is widely expected to be Kevin Warsh, a former Fed governor and longtime critic of the central bank’s post-financial crisis expansion. Wash has argued for a reduced role for the Fed: less oversight, a smaller balance sheet and less mission creep. Broader goals involving climate change, inequality, financial stability may soon be jettisoned in favor of a more singular focus: keeping inflation in check.

Michelle Bowman, another Trump appointee and current nominee for vice chair of supervision, represents a similar shift. She’s expected to take a lighter regulatory approach than her predecessor, Michael Barr.

Even before they have taken office, their presence at the conference signaled a pivot already under way.

The Fed is preparing to unveil an updated policy framework this summer, a product of months of internal review. But insiders question whether it will matter. With new leadership and a potentially reconstituted committee in 2026, this summer’s changes may be short-lived.

Mester expects only modest tweaks, perhaps a more “symmetric" view of the inflation target and improved projections. Others see bigger changes. Former Fed economist Andrew Levin warned of weakening internal checks and transparency at the central bank. If the Fed is to revise its framework, he argued, it must do so with clearer governance, especially amid so much uncertainty.

The Warsh view is that the Fed has evolved into a far-reaching, data-heavy institution willing to intervene boldly in crises and steer the economy. Warsh aims to challenge that model, with political and intellectual shifts.

Furman says we are in a “whole new phase of the economy." Even before Trump’s new tariffs, inflation had plateaued and Furman doubted it would have fallen much further. Now, the Fed is navigating without a clear sense of where it is headed, he said.

The next era of the Fed may be more constrained. Some welcome that change, seeing it as a return to focus. Others worry that stripping away tools now could leave the Fed underpowered in the next financial crisis.

So what happens when that crisis hits? Some are worried. Some aren’t. Let’s hope we don’t have to find out anytime soon.

Write to Nicole Goodkind at nicole.goodkind@barrons.com