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President Biden will re-nominate Jerome H. Powell. Federal Reserve ensuring policy continuity in a time of rapid inflation and great economic uncertainty, but potentially angering progressive Democrats agitating for a change in leadership.
The highly anticipated decision was a return to the tradition of the central bank’s senior official. He was reappointed regardless of his partisan identity – a norm violated by former President Donald J. Trump, who appointed Mr. Powell instead of reappointing Janet L. Yellen.
It reflected a general view of Mr. Biden and his senior aides that Mr. Powell was successful in supporting the economy through the pandemic recession and recession recovery. There is also a claim that Mr. Powell is the right leader to steer the Fed through an economically and politically dangerous storm of price hikes that administration officials believe will dissipate next year.
Mr. Biden will also appoint Lael Brainard, a governor that many progressive groups have advocated replacing Mr. Powell, as vice chairman of the Fed. Renaming Mr. Powell, who won bipartisan support minutes after the announcement, would also save the White House from a frustrating confirmation battle if the President had elected Mrs. Brainard, who had less Republican support than Mr. Powell in the Senate.
The stakes on the selection are unusually high.
Inflation has soared sharply this year, and consumer prices have risen at the fastest rate in more than three decades to October this year. Keeping consumer prices stable and maintaining that balance while the central bank strives for maximum employment may require difficult policy choices in the coming months.
As it falls to the Fed to tame inflation, Mr. Biden to suffer politically as the prices of food, gas and plane tickets rise. The president has repeatedly tried to reassure Americans that his economic policies will eventually calm inflation, and he is expected to repeat during Tuesday’s remarks. Fed decisions in recent weeks have mingled with the politics of price hikes, especially as the president has forced Senate Democrats to unite around a $2.2 trillion climate change and social policy bill that Mr. Biden says will ease inflationary pressures in the coming years. warning will raise prices immediately.
Biden, who will also nominate a governor, Lael Brainard, to serve as Fed vice chair, said he was confident both Mr. Powell and Ms. Brainard would work to stabilize inflation and keep the economic recovery on track.
Mr Biden said on Monday, “President Powell and Dr. “I am confident that Brainard’s focus on keeping inflation low, keeping prices stable and achieving full employment will make our economy stronger than ever before.”
Mr. Powell’s reappointment shows that the White House, which has a chance to completely reshape the Fed, does not intend to completely overhaul the institution. The Biden administration already has a vacant governor role to fill, and two more seats will be opened early next year, with Mr. Biden going to appoint at least three of the seven governors. The president should also take on a variety of leadership roles, including the Fed’s vice president of supervision, a position that is powerful given his influence over bank surveillance.
Mr. Biden has come under pressure from progressive and moderate Democrats to choose a variety of leaders for the Fed who will prioritize tough bank regulations and do their best to address climate change risks to the financial system.
Mr. Powell has come under criticism for being slow to address climate change and for supporting measures that crumble some post-crisis fiscal rules. In a statement Monday, Mr Biden said he expects Mr Powell to “address the economic risks posed by climate change and stay ahead of the emerging risks to our financial system” with Ms Brainard.
Time will tell if this will be enough to appease Mr. Powell’s critics. The Fed chair’s tenure has been criticized by some progressives, including Massachusetts Senator Elizabeth Warren. Mr. Powell called “A dangerous man.” On Friday, Rhode Island Senator Sheldon Whitehouse and Oregon Senator Jeff Merkley published a statement I oppose Mr. Powell’s reappointment. But Republicans who supported Mr. Powell when he was nominated by Mr. Trump as president will likely vote to reaffirm him.
Shortly after the nomination was made public, Pennsylvania Republican Senator Patrick J. Toomey issued a statement saying he would support Mr. Powell’s nomination.
Mr. Biden’s decision was influenced by a complex economic moment. Inflation has risen further Thanks to rising consumer demand, tangled supply lines, and labor shortages, which are helping drive up used cars, sofas, and even food and rental costs. Yet millions of workers It lacks a labor market compared to before the pandemic. As a result, the Fed can continue to balance its two key objectives as it charts its future policy path.
So far, the central bank has decided to slow down. major bond buying programThis is the first step towards withdrawing monetary policy support, which, if the economy is to prevail, will make it more agile to raise interest rates next year.
The federal funds rate has been set at near zero since March 2020, keeping many types of borrowing cheap and helping to fuel home and car purchases and other types of demand, which in turn laid the groundwork for strong hiring. Raising it could cool growth and weaken inflation.
Still, trying to slow price increases will come at a cost. Workers are still returning after serious job losses at the start of the pandemic, and the Fed hopes to give the job market more room and time to recover. This is especially true because continued waves of infections may be keeping many people from seeking employment, either because of health problems or because they lack childcare.
Navigating the next steps will not be an easy task.
Mr. Powell is a Republican, first appointed Fed governor by President Barack Obama, then promoted to the presidency by Mr. Trump, and his decision to replace Mr. Yellen as Fed chairman upends a long-standing tradition of presidents reappointing Fed chairmen. counter party that does a good job.
Before the White House decision, some economists argued that it would be worthwhile to relaunch this model. Doing so would signal that the Fed is a technocratic body that sets prudent economic policy regardless of political considerations.
Also, Mr. Powell is often lauded for his performance as chairman who has seen the central bank maintain full employment vigorously. the Fed, the workings of Wall Street and prevented a financial disaster could go through this economy.
But there was Mr. Powell facing opposition from some progressive Democrats, first about the date of voting on changes that loosened financial regulation for banks, and then because of an ethics scandal that occurred while overseeing the central bank. Two of the Fed’s 12 regional presidents made important financial transactions For their special accounts in 2020, when the FED is actively saving many markets from the fallout of the pandemic.
Mr. Powell said he had deferred the person whom Congress had approved to the role of bank supervisor. set the agenda As for regulatory issues. The Fed has unveiled its new code of ethics since news of financial activity broke last year.
Candidates chairing the Fed Board and Fed leadership positions must first pass a Senate committee and then a vote on the Senate floor.
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