Biden keeps Jerome Powell at the head of the Fed

Joe Biden kept Jerome Powell on Monday (22) as chairman of the Federal Reserve (Fed, the central bank of the United States) for a second term of four years. Lael Brainard, the institution’s only Democratic governor, won the vice presidency in an election that demonstrates a desire for continuity.

The nomination, which must be confirmed by the Senate, ends weeks of speculation over whether Biden, a Democrat, would return the Republican to the Fed chairmanship or if he would listen to his party’s left.

In a statement, the White House praised “the decisive action by President Powell and the Federal Reserve to cushion the impact of the pandemic and get the US economy back on track.”

Powell secured leadership “during an unprecedented difficult period” while “Lael Brainard, one of our country’s leading macroeconomists, played a key role at the Federal Reserve, working with Powell to help drive our country’s strong economic recovery.” he pointed out.

“We can’t just go back to where we were before the pandemic, we need to better rebuild our economy,” Biden said.

“I am confident that President Powell’s and Brainard’s approach to keeping inflation low, prices stable and achieving full employment will make our economy stronger than ever,” he added.

Powell led the Fed’s response to the recession caused by the pandemic, which involved reducing the lending rate to zero and injecting trillions of dollars of liquidity.

The bank withdrew these measures as the economy recovered, but inflation also soared, causing Biden’s popularity to drop in polls.

Powell also spearheaded a change in Fed policy to keep interest rates lower for longer than usual to encourage full employment, especially for minorities.

The Fed chairman and other central bank leaders argue that inflation will be temporary and do not expect interest rate hikes until at least the middle of next year.

“Powell’s re-election and the appointment of Governor Brainard are not a surprise, but a sign of continuity at the central bank,” says Rubeela Farooqi of High Frequency Economics.

“Overall, with Powell as president, communication will remain clear and transparent and policy will not stray too far from the current moderate path.”

This was a sensitive decision for Joe Biden, who is in the midst of Congressional talks about his investment plans.

In economic terms, it is one of the most important decisions of the US President’s term.

Jerome Powell, 68, has been head of the mighty Federal Reserve since 2018. This billionaire lawyer and former investment banker was named governor by Barack Obama in 2012 and president by Donald Trump in 2017.

His nomination must now be confirmed in the Senate, first by the banking committee and then on the floor. It must have enough support to stay ahead of the Fed.

Some members of the left wing of the Democrats said, however, that they would not support him, considering his action too timid on climate change.

Lael Brainard, the Fed’s only Democratic governor, was his main adversary. Biden received them both at the White House in early November.

But his profile generated less consensus. His positions in favor of more banking and financial regulation could cause a rejection in the Senate.

Brainard also needs the green light from the Senate and, if confirmed as vice president, will replace Republican Richard Clarida.

Biden will have other occasions to reshape the monetary institution. There are three other seats vacant on the Fed’s board of governors, including that of oversight vice president, a sort of bank police officer, a position held until recently by Republican Randal Quarles.

Biden will release the remaining nominations in early December and “is committed to increasing diversity in the composition of the Council,” the White House reported.