Biden keeps Powell as Fed chief, elevates Brainard to vice-chairman

Fed Governor Lael Brainard and Fed chief Jerome Powell in a 2019 photo.
Fed Governor Lael Brainard and Fed chief Jerome Powell in a 2019 photo.PHOTO: REUTERS

WASHINGTON (BLOOMBERG) - United States President Joe Biden selected Mr Jerome Powell for a second four-year term as Federal Reserve chairman while elevating Governor Lael Brainard to vice-chairman, keeping consistency at the US central bank as the nation grapples with the fastest inflation in decades and the lingering effects of Covid-19.

The move, announced by the White House on Monday (Nov 22), rewards Mr Powell for helping rescue the US economy from the pandemic and tasks him with protecting that recovery from a surge in consumer prices.

A Republican, Mr Powell faces what will likely be a smooth confirmation in the Senate, where he was backed for his first term as chairman in an 84-13 vote and whose members he subsequently worked hard to woo.

Dr Brainard will replace Mr Richard Clarida in the vice-chairman slot and may face opposition from Senate Republicans for her confirmation. She was interviewed by Mr Biden for the chairman position and was seen as a strong contender for the separate job of vice-chairman for supervision, which remains vacant.

Mr Biden plans to announce that nomination, along with additional picks for open seats on the Board of Governors, beginning in early December, the White House said.

Mr Powell, 68, has enjoyed bipartisan support, including from Treasury Secretary Janet Yellen and other Democrats, although progressive Democrats such as Massachusetts Senator Elizabeth Warren lobbied Mr Biden to choose someone more aligned with them on overseeing banks and battling climate change.

Mr Powell also had to answer for an ethics scandal after trading revelations by some senior Fed officials. Mr Biden's choice of Mr Powell will also likely win approval from investors by ensuring continuity at the central bank as it begins withdrawing ultra-easy monetary policy amid the challenges of persistent inflation.

Mr Biden, in a written statement, called the economic recovery so far a "testament to the economic agenda I've pursued and to the decisive action that the Federal Reserve has taken under Chair Powell and Dr Brainard to help steer us through the worst downturn in modern American history and put us on the path to recovery".

Mr Biden added: "I'm confident that Chair Powell and Dr Brainard's focus on keeping inflation low, prices stable, and delivering full employment will make our economy stronger than ever before."

He also singled out what he called their "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".

Dr Brainard and Mr Powell have similar views on monetary policy, but differ over bank regulation, with Dr Brainard opposing at nearly every step Mr Powell's modest rollbacks of some of the tough curbs imposed on banks after the financial crisis.

Dr Brainard, 59, was appointed a Fed governor in 2014 by then President Barack Obama. In 2020, Mr Biden considered picking her as Treasury Secretary, before he picked Ms Yellen.

A graduate of Harvard University, Dr Brainard served in Mr Bill Clinton's White House as deputy national economic adviser. In 2009, under Mr Obama, she joined the Treasury and became undersecretary for international affairs in 2010.

Mr Powell's second term is going to be very different from his first. While the economy is rebounding, inflation is running at a three-decade high, Covid-19 cases remain elevated and strained supply chains present big uncertainties.

Some officials are already suggesting the Fed may need to pull back its massive asset-purchase programme faster than now planned, and Mr Powell will also be presiding over a committee with a number of members who likely want to raise interest rates sooner than he does.

Mr Powell said this month that he would not consider hiking rates until the labour market shows greater signs of healing.