Here’s what Jerome Powell’s second term as Fed chief means for your wallet

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Federal Reserve Chairman Jerome Powell is set to keep his title for another four years after President Joe Biden announced that he would nominate Powell for a second term on Monday.

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Biden also announced his choice for vice chair – current Fed governor Lyle Brainard – who faces a rocky path to confirmation, and is also seen by analysts as potentially more liberal on inflation.

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If ratified by the Senate, what would the Fed’s choice of Biden mean for Americans’ paychecks, mortgages and stock portfolios? On the latter issue, some analysts and Powell supporters say the stock market has responded positively to Powell’s steady hand and that his tenure has provided much-needed stability during these uncertain times.

The two nominations come at a crucial time. Inflation is at a 31-year high. Americans are paying more for anything from gasoline to groceries — which last month rose 6.1% and 1%, respectively, compared to September, and are up nearly 50% and 5.4% from last October.

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,‘The housing the Fed was providing is slowly starting to take it back, and this exacerbates stock market volatility, more modest real estate returns, and higher borrowing costs.’,


–Greg McBride, Chief Financial Analyst at Bankrate.com

In separate remarks made with Biden on Monday, Powell, 68, and Brainard, 59, said they were committed to using the Fed’s tools to help beat inflation, and in particular to the working class. Committed to reducing the toll on Americans.

Many analysts and economists see Powell’s reappointment as a positive for the stock market. “It provides continuity at a critical time,” Chris Zacarelli, chief investment officer of the Independent Advisors Alliance, told Businesshala.

Greg McBride, chief financial analyst at Bankrate.com, said that even if Biden had nominated, the Fed was essentially due for policy changes.

“The housing that the Fed was providing is slowly starting to take it back, and this drives stock-market volatility, more modest real estate returns, and higher borrowing costs,” McBride told Businesshala.

,Powell’s reappointment also means the Fed will continue to distance itself from regulating digital currencies such as bitcoin, which the head of the central bank has said he would not favor banning.,

Even though Powell, himself a Republican, has been criticized primarily by Republican lawmakers for not doing enough to curb inflation, it is likely that “the Powell-led Fed continues to tolerate inflationary overshoots.” Will not be ready, which we expected,” Kevin Cummins said. Chief US Economist at NatWest Markets.

Powell’s reappointment also means that the Fed will continue to distance itself from regulating digital currencies such as bitcoin BTCUSD,
+2.29%,
Which Powell has said he is not in favor of banning.

Sen. Elizabeth Warren, a liberal Democrat, had made no secret of her desire to see Powell replaced, criticizing her at a public hearing for an alleged light touch on deregulation of commercial banks. (Other left-center Democrats have criticized Powell for not being in a position to deal with climate change and its effects.)

Brainard, however, could push the Fed to “take a tougher stance on regulatory matters,” McBride said, adding that “the form it takes remains to be seen.”

While Powell is considered a political liberal, Brainard, who may serve as his second-in-command, is the only registered Democrat on the board of governors at the Fed.

He has been a strong proponent of increased regulatory oversight on banks to monitor the risks they take and prevent potential repercussions affecting the overall economy.

,The Federal Reserve, led by Powell, previously announced that it would begin to shelve a bond-buying program designed to prop up the economy during the pandemic.,

“I am confident that with Chair Powell and Dr. Brainard’s focus on keeping inflation low, prices stable, and full employment, our economy will be stronger than ever,” Biden said in a statement on Monday.

“Together, they 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,” he said.

Earlier this month, the Federal Reserve – led by Powell – announced that it would begin winding down a bond-buying program designed to prop up the US economy during the pandemic.

Buying bonds lowers long-term interest rates and has been a signal to markets that the Fed is not going to raise short-term target interest rates.

The Fed began buying trillions of dollars worth of bonds when the pandemic hit in early 2020, eventually slowing the pace to $120 billion per month in June 2020. The central bank’s balance sheet topped $8 trillion.

Last December, the Fed said it would continue buying bonds until the economy made “substantial” progress toward its goal of stable 2% inflation and a healthy labor market.

On November 3, however, the Fed said it would reduce the pace of purchases by $15 billion per month in November and December, adding that it judged that “a similar reduction in the pace of net asset purchases would be justified each month.” “

The central bank insisted that the taping was not on a predetermined path. The FOMC is “ready to adjust the pace of purchases as warranted by changes in the economic outlook.”

The eight-month tapering timeline gives the Fed time to see if inflationary pressure eases.

Greg Robb contributed to this report.

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