Biden picks Jerome Powell to lead the Fed for a second term as the U.S. battles Covid and inflation

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  • President Joe Biden announced Monday that he is nominating Jerome Powell for a second term as Federal Reserve chairman and will replace Fed Governor Lyle Brainard as vice president.
  • The move comes after weeks of speculation that Brainard could be approved.
  • Taking the move, Biden praised Powell for his “decisive” leadership during the COVID crisis.

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Jerome Powell, who guided the Federal Reserve and the country’s economy through a staggering and sudden Covid-19 recession by implementing unprecedented monetary stimulus, has been named for a second term as US central bank president.

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President Joe Biden announced Monday morning after weeks of speculation that a push from progressives could replace Fed Governor Lyle Brainard.

Brainard will instead be the deputy chairman of the board of governors; He was widely expected to get a separate vice president for the supervisory post, which oversees the country’s banking system. As vice-president, she will replace Richard Clarida, whose term ends on January 31, 2022.

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Read more: Who is Lyle Brainard?

“As I have said before, we cannot return to where we were before the pandemic, we need to improve our economy, and I believe the focus of Chair Powell and Dr. Brainard is on keeping inflation down, prices down. Stable, and delivering full employment will make our economy stronger than ever,” Biden said in a statement.

The next nomination for confirmation is the head of the Senate.

In making the decision, Biden praised the Fed for its “decisive” action in the early days of the pandemic.

The Fed launched an unprecedented series of lending programs, as well as cut interest rates to nearly zero and instituted a monthly bond-buying program that raised more than $4 trillion in central bank Treasury and mortgage-backed securities. Will do

“Chair Powell has provided steady leadership during an unprecedented challenging period, including the largest economic downturn in modern history and attacks on the independence of the Federal Reserve,” a White House statement said. “During that time, Lyle Brainard – one of our nation’s leading macroeconomists – has held a key leadership role at the Federal Reserve, working with Powell to help power our nation’s strong economic recovery. Is.”

The announcement coincided with a slight boost to stock market futures, while government bond yields were higher across the board.

Markets are watching closely to see what momentum the Fed will follow as it unwinds its larger policy support.

Officials have already indicated they will begin to scale back bond purchases with a cut of about $15 billion per month, which will see the program likely end in late spring or early 2022.

The hike in interest rates is another matter.

Most Fed officials have so far said they will not consider raising rates at least until the bond-buying temper winds down. However, markets are looking for a faster timeline for rates, with the initial hike now set for June 2022.

Controversy in recent days

Although Powell led the day, it was not without controversy.

The Fed has recently come under fire following an ethics scandal in which several executives engaged in trading stocks at a time when the institution was implementing policies aimed at boosting the markets. Powell disclosed that he owned municipal bonds, which the Fed was also buying, and that he also bought and sold funds linked to the broader stock market index.

At the same time, the Fed has been hit by inflation that is running faster than anticipated – in fact, at the fastest pace in 30 years. Official Fed policy from September 2020 allows inflation to warm slightly above the standard 2% target if it allows for full and inclusive employment, but prices are rising above that level.

Powell has said that inflation will calm down once the factors related to the pandemic normalize. But recent readings have raised questions about the so-called average inflation target, indicating a historic turning point in central bank monetary policy.

Inflation has also come with rapid economic recovery and the unemployment rate has declined from the pandemic’s peak of 14.8% to the current 4.6%.

The White House statement said the recovery “is a testament to the success of the president’s economic agenda, and it is a measure of decisive action by Chair Powell and the Federal Reserve to mitigate the impact of the pandemic and get America’s economy back on track.” Testament.”

Brainard emerged as a major force in the race to see who would take on the Fed over the next four years. He has addressed a number of issues important to the Biden administration, most notably the need for the Fed to strengthen the banking system against disruptive climate change events.

Brainard, a former Under Secretary of the Treasury during the Obama administration, has also been a strong supporter of the digital dollar.

The White House statement emphasized the importance of progressives for the Fed in the years to come.

Biden said Powell and Brainard “also share my deep belief that urgent action is needed to address the economic risks posed by climate change and stay ahead of emerging risks in our financial system.”

“Fundamentally, we need stability and independence at the Federal Reserve if we are to continue to build on this year’s economic success – and after their trial over the past 20 months I am confident that Chair Powell and Dr. Will provide our country with the strong leadership it needs.”

Biden still has more work to do at the Fed: There is a vacant position on the board of governors, while the Clarida vacancy will need to be filled in January. He would also have to name a vice president to oversee, a position Randall Quarles held until his term ended in October.

Congress’ initial reaction to Monday’s news was positive.

Sherrod Brown, chairman of the deciding Senate Banking Committee, which will be the first to hear the nominations, said, “I look forward to working with Powell to stand up to Wall Street and stand up for workers, to help them in their Share in the prosperity created by.

return from covid

President Donald Trump surprised Powell somewhat in 2018. Trump chose to pass then-Chairman Janet Yellen, an unusual move given that Fed leaders are rarely removed after just one term. Former President Barack Obama initially appointed Powell in 2014 to serve a 14-year term as governor.

Although Trump nominated Powell, he later lashed out at the Fed chief after the central bank raised interest rates seven times in 2017 and 2018. The former president called Fed policymakers “boneheads” for trying to normalize policy. The economy recovered.

As for Brainard, now widely expected to be named vice president of supervision, a key Fed position overseeing the country’s banking system.

The Fed is empowered to fulfill two mandates by Congress: maximize American employment and keep inflation stable. Its leaders, known as governors, are nominated by the president and vote on how to adjust interest rates, regulate the nation’s largest banks, and monitor the health of the economy.

To counter the spike in unemployment and recession that began in the spring of 2020, the central bank slashed interest rates and began buying some $120 billion in Treasury bonds and mortgage-backed securities each month. It also launched a variety of lending programs aimed at keeping fixed income markets functioning after suffering significant stress at the start of the pandemic.

Economists attribute the quick and massive response to stabilizing financial markets and subsequently suppressing long-term interest rates. Low interest rates make it easier for corporations to take out loans to build new factories, or for individuals to buy a home or car.

“Under Powell, the Fed has placed a greater emphasis on keeping the economy operating at maximum employment,” JPMorgan’s chief US economist Mike Ferroli said via email.

“It is a goal that progressive economists have long advocated and a goal that is likely in line with Biden’s agenda.”

Treasury Secretary Janet Yellen, one of Biden’s top economic advisers and an adviser on his Fed nomination, told CNBC earlier this month that she was pleased with the work of the Fed chief. Yellen was the first woman to serve as chair of the Fed and is the nation’s first female Treasury Secretary.

“I spoke to him about the candidates and advised him to choose someone who is experienced and credible,” Yellen said. “I think Chair Powell has definitely done a good job.”

Powell is also popular on Capitol Hill, where lawmakers on both sides of the aisle have praised his leadership and affability since Yellen took office in February 2018.

The news is likely a disappointment to progressives, including Sen. Elizabeth Warren, D-Mass., who said in September that the Fed’s role in easing banking rules in recent years made Powell a “dangerous man” and that he would oppose the nomination.

This is breaking news. Please check back here for updates,

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