Jerome Powell is the “right person“To lead the Federal Reserve (Fed) for a second term and fight against the record rise in US inflation, President Joe Biden said on Monday after announcing that he is keeping the head of the world’s most influential central bank in office.
The appointment, which is expected to be confirmed by the Senate, puts an end to weeks of speculation about whether Biden, a Democrat, would reappoint the Republican to the presidency of the monetary entity, or if he would listen to the left wing of his Democratic party to replace him by Fed Governor Lael Brainard.
Finally, Brainard will be vice president of the central bank, Biden said, while Powell will remain at the forefront of the process of reducing stimuli decreed by the pandemic and the likely beginning of interest rate hikes next year.
Speaking to Powell and Brainard at an event at the White House, Biden endorsed the Fed Chairman for helping promote economic recovery faster than expected after last year’s collapse, highlighting progress toward restoring the more than 20 million jobs lost to COVID-19.
“I believe Jay is the right person to help us get through and finish that effort while addressing the threat of inflation and what it represents to our economies and families.yes, ”Biden said, referring to Powell by his nickname.
Powell has led the central bank’s response to the pandenmic recession, which involved cutting the lending rate to zero and injecting trillions of dollars of liquidity.
The bank has withdrawn those endorsements as the economy recovers, but inflation has also skyrocketed, causing Biden’s popularity ratings to drop in polls.
Powell also led a change in Fed policy to keep interest rates lower for longer than normal to stimulate full employment, particularly for minorities and groups that are often disadvantaged.
The Fed chairman and other central bank leaders argue that inflation will be temporary and they do not expect interest rate hikes until at least the middle of next year.
Powell promised to use the “tools to support the economy and a strong labor market and to prevent higher inflation from taking hold. “
Expenses at sight
The 68-year-old Powell was appointed by Donald Trump in 2018, when the then president decided not to give a second term to Democrat Janet Yellen, Biden’s current Secretary of the Treasury.
Powell must be confirmed by the Senate, which Biden’s Democrats narrowly control, although analysts predict he will receive some votes from opposition Republicans, such as Mitt Romney’s.
However, at least three Democratic senators oppose Powell’s reelection. Senator Elizabeth Warren accuses him of “failures in regulation, climate and ethics”.
Biden has been focused on getting congressional approval for a gigantic welfare bill that would spend $ 1.8 trillion in ten years.
To do this he needs the votes of almost every Democrat, and appointing a Fed chairman capable of taking a tougher line on banks and climate change could be seen as a way to build support among progressives. Brainard, the only Democrat on the central bank’s board of governors, was considered the right person for it.
“Little difference”
Biden said he decided to appoint a Republican president and a Democratic vice president to head the Fed because “Broad bipartisan support is important, especially now in a nation so politically divided”.
He also requested that the Fed “be a leader among global central banks in dealing with climate-related financial risks”, At a time when the country is facing extreme weather events and the use of green energy sources is increasing.
Jay Bryson, an economist at Wells Fargo corporate and investment bank, estimates that when it comes to the Fed’s major decisions, such as when to raise interest rates, Brainard’s appointment might not have changed much.
Brainard also needs the green light from the Senate and if confirmed as vice president, he will replace Republican Richard Clarida.
Biden will have other opportunities to reshape the monetary institution, as there are three vacant seats on the board of governors, including vice president of oversight.
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