Biden chooses Jerome Powell to lead the Fed for the second term as the U.S. fights Covid and inflation

Jerome PowellLeading the Federal Reserve and the country’s economy through an astonishing and sudden Covid-19 recession by implementing unprecedented monetary stimulus, was nominated for the second term as chairman of the US Central Bank.

President Joe Biden announced Monday morning, following weeks of speculation that a push from progressives could spot the Federal Reserve’s Lael Brainard.

Instead, Brainard will be the Vice-Chairman of the Governor. She was widely expected to serve as another vice-chairman for the supervisory post that oversees the country’s banking system. She will replace Richard Clarida, whose term expires on January 31, 2022, as Vice-Chair.

Read more: Who is Lael Brainard?

“As I said before, we can’t go back to what it was before the pandemic. We need to build a better economy. I’m convinced that Chair Powell and Dr. Brainard are focused on keeping inflation low. It is stable and full employment will strengthen the economy more than ever. “

The nomination then goes to the Senate for confirmation.

In making the decision, Biden praised the Fed for the early “decisive” actions of the pandemic.

The Federal Reserve rolls out an unprecedented set of lending programs, while lowering interest rates to near zero and increasing central bank holdings of Treasury and mortgage-backed securities by more than $ 4 trillion in monthly bond purchases. The program has started.

“Chair Powell has taken steady leadership during unprecedented and difficult times, such as the biggest recession in modern history and the attack on the Federal Reserve’s independence,” the White House statement said. “During that time, Lael Brainard, one of our leading macroeconomicists, has played an important leading role in the Federal Reserve and has worked with Powell to support our strong economic recovery.”

The announcement was consistent with Boost to the stock market On the other hand, yields on government bonds were high overall.

The market is watching the pace at which the Fed unleashes large-scale policy support.

Authorities have already indicated that they will begin cutting bond purchases, with a monthly cut of approximately $ 15 billion, and the program could be completed in late spring or early summer 2022.

Raising interest rates is another matter.

So far, most Fed officials have said they will not consider raising rates, at least until the gradual decline in bond purchases has subsided. However, the market is demanding a faster timeline for pricing, with the first increase currently priced in June 2022.

“The president has chosen the status quo of monetary policy and regulation,” said Mark Zandi, chief economist at Moody’s Analytics. “The Fed slowly but steadily takes its foot off the financial accelerator.”

Recent controversy

Powell carried the day, but it wasn’t without controversy.

The Federal Reserve has recently been attacked following an ethical scandal in which multiple officials engaged in trading stocks while institutions were implementing policies aimed at boosting the market. .. Powell revealed that he owns the municipal bonds that the Fed is also buying, and has also bought and sold funds related to a wide range of stock indexes.

At the same time, the Fed has been hit by faster-than-expected inflation, and in fact is moving at the fastest pace in 30 years. The Fed’s official policy since September 2020 has been to raise inflation somewhat above the standard 2% target if it enables full and comprehensive employment, but prices are well above that level. increase.

Powell argues that inflation will cool when the factors associated with the pandemic return to normal. However, recent measurements have raised questions about the so-called average inflation target, which suggests a historic shift in central bank monetary policy.

Inflation was also accompanied by a rapid economic recovery and a drop in the unemployment rate from the pandemic peak of 14.8% to the current 4.6%.

The White House statement said the recovery was “a testament to the success of the president’s economic agenda, a testament to the decisive actions of Chair Powell and the Federal Reserve to ease the effects of the pandemic and bring the US economy back on track. “”

Brainard has emerged as a key force in the competition for who will take over the Fed over the next four years. She pointed out some important issues for the Biden administration, especially the need for the Fed to strengthen its banking system against catastrophic climate change events.

Brainard, a former Under Secretary of Finance during the Obama administration, has strongly supported the digital dollar as a way to open the financial system to those who do not have bank accounts.

The White House statement emphasized the importance of the Fed’s progress over the next few years.

Biden also shared my deep belief that Powell and Brenard “need urgent action to deal with the economic risks posed by climate change and to stay ahead of the new risks of the financial system. I have. “

“Basically, if we want to further develop this year’s financial success, we need the stability and independence of the Federal Reserve. After their trials over the last 20 months, Chair Powell and Dr. Brenard will do so. We are confident that we will provide the strong leadership our country needs. “

Biden still has a lot to do at the Fed. There is one vacant seat on the board, but Clarida’s vacant seats must be filled in January. He also needs to appoint a vice-chairman for the oversight. This is the post that Randal Quarles held until his term expired in October. The White House announced on Monday that those moves would be announced in early December.

The first Congressional reaction to the news on Monday was positive.

Senator Sherrod Brown (D-Ohio), chairman of the important Senate Banking Committee, who first hears the nomination, said: In the prosperity they create “

Pennsylvania Republican Patrick Toomy said he disagreed with central bank policies, but said he supported Powell.

Battle from Covid

President Donald Trump appointed Powell to be a little surprised in 2018. Mr. Trump chose to take over the then chairman, Janet Yellen. This is a rare move in which Fed leaders are rarely dismissed after just one term. Former President Barack Obama initially appointed Powell as governor in 2014 for a 14-year term.

Mr. Trump nominated Mr. Powell, but later criticized the head of the Federal Reserve Board when the central bank raised interest rates seven times in 2017 and 2018. The economy has recovered.

With regard to Brainard, she is now widely expected to be appointed Vice-Chair of Supervision, a major federal post to oversee the country’s banking system.

The Federal Reserve is empowered by Congress to fulfill its two obligations of maximizing US employment and stabilizing inflation. Its leader, known as the governor, is appointed by the president to vote on how to adjust interest rates, regulate the country’s largest banks, and monitor economic health.

To counter the surge in unemployment and recession that began in the spring of 2020, central banks have lowered interest rates and have begun buying about $ 120 billion in government bonds and mortgage-backed securities each month. We also launched a variety of lending programs aimed at maintaining the functioning of the bond market after enduring heavy stress at the start of the pandemic.

Economists have acknowledged a swift and considerable response to stabilize financial markets and later curb long-term interest rates. Low interest rates make it easier for businesses to take out loans to build new factories and for individuals to buy homes and cars.

“Under Powell, the Fed has focused on running the economy with maximum employment,” Mike Feroli, chief economist at JP Morgan in the United States, said in an email.

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

Treasury Secretary Janet Yellen, one of Biden’s Supreme Economic Advisory Board and Fed nomination counselor, told CNBC earlier this month: Satisfied with the work of the Federal Reserve Chief.. Yellen was the first woman to chair the Fed and the country’s first female Treasury Secretary.

“I talked to him about the candidate and advised him to choose an experienced and reliable person,” Yellen said. “I think Chair Powell did a good job.”

Powell is also popular on Capitol Hill, and after taking over Yellen in February 2018, lawmakers on both sides of the aisle have praised his leadership and affection.

The news is likely to be disappointing for progressives, including Sen. Elizabeth Warren, D-Mass. Spoke on the Fed’s role in recent bank deregulation in September. Make Powell a “dangerous man” And she would oppose his denomination.

Biden recently met with Warren to discuss his appointment, according to sources familiar with the matter.

Biden chooses Jerome Powell to lead the Fed for the second term as the U.S. fights Covid and inflation

Source link Biden chooses Jerome Powell to lead the Fed for the second term as the U.S. fights Covid and inflation

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