Biden taps Powell for second terms as Fed chair; Brainard to be vice chair

President Joe Biden announced Monday that he’s nominating Jerome Powell for a second four-year term as Federal Reserve chair, endorsing Powell’s stewardship of the economy through a brutal pandemic recession in which the Fed’s ultra-low rate policies helped bolster confidence and revitalise the job market.

Biden also said he would nominate Lael Brainard, the lone Democrat on the Fed’s Board of Governors and the preferred alternative to Powell among many progressives, as vice chair.

The President said he will fill the three remaining slots on the board, including a vice chair for supervision, a bank regulatory post, in early December.

Biden’s decision, reached after extensive consideration, strikes a note of continuity and bipartisanship at a time when surging inflation is burdening households and raising risks to the economy’s recovery.

In backing Powell, a Republican who was first elevated to his post by President Donald Trump, Biden brushed aside complaints from progressives that the Fed has weakened bank regulation and has been slow to take account of climate change in its supervision of banks.

If confirmed by the Senate, Powell would remain one of the most powerful economic officials in the world.

By either raising or lowering its benchmark interest rate, the Fed seeks to either cool or stimulate growth and hiring, and to keep prices stable. Its efforts to direct the U.S. economy, the largest in the world, typically have global consequences.

The Fed’s short-term rate, which has been pegged near zero since the pandemic hammered the economy in March 2020, influences a wide range of consumer and business borrowing costs, including for mortgages and credit cards. The Fed also oversees the nation’s largest banks.

In a second term, to begin in February, Powell would face a difficult and high-risk balancing act: Rising inflation is causing hardships for millions of families, clouding the economic recovery and undercutting the Fed’s mandate to keep prices stable.

But with the economy still 4 million-plus jobs shy of its pre-pandemic level, the Fed has yet to meet its other mandate of maximising employment.

If the Fed moves too slowly to raise rates, inflation may accelerate further and force the Fed to take more draconian steps later to rein it in, potentially causing a recession.

Yet if the Fed hikes rates too quickly, it could choke off hiring and the economic recovery.

Powell’s re-nomination must be approved in a vote by the Senate Banking Committee and then confirmed by the full Senate, which is considered likely.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor