WASHINGTON: Jerome Powell is the “right person” to lead the Federal Reserve and fight the record spike in US inflation, President Joe Biden said Monday as he made his long-awaited pick for chair of the world’s most influential central bank.
The nomination, expected to win confirmation by the Senate, ends weeks of speculation over whether Biden would appoint the Republican chair to a second term or heed calls from left-wing members of his Democratic Party to replace him with another candidate, such as Fed Governor Lael Brainard.
Instead, Brainard will serve as vice chair, Biden said, while Powell will remain in the Fed’s driver’s seat, presiding over the rollback of its pandemic stimulus and the likely beginning of interest rate hikes next year.
Speaking alongside Powell and Brainard at a White House event, Biden credited the Fed chair with helping to spur the economy’s faster-than-expected recovery from last year’s collapse, pointing to the progress made toward restoring the more than 20 million jobs Covid-19 destroyed.
“I believe Jay is the right person to see us through and finish that effort while also addressing the threat of inflation and what it poses to our economies and families,” Biden said, referring to Powell by his nickname.
Powell has led the central bank’s response to the massive pandemic downturn, which saw it slash its lending rate to zero and roll out trillions of dollars in liquidity.
The bank has pulled back those measures as the economy has recovered, but inflation has also spiked, fueling a drop in Biden’s approval ratings.
The Fed chair and other central bank leaders argue the inflation wave will prove temporary and have said they do not foresee rate hikes at least until the middle of 2022, while saying their policies can address employment disparities, with racial minorities and less-educated people getting hired less.
Powell pledged to use “our tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched.”
Powell, 68, was appointed by Biden’s Republican predecessor Donald Trump and took office in 2018 after the then-president decided not to give Democrat Janet Yellen a second term in the seat.
Now Treasury secretary, Yellen told CNBC that she believes Powell and Brainard will “have broad support among Congress and the public and can be counted on to do an excellent job.”
Powell must be confirmed by the Senate, which Biden’s Democrats narrowly control, though analysts predict he will receive a number of votes from Republicans in the opposition — one of whom, Mitt Romney, immediately confirmed his intention to vote yes.
However, at least three Democratic senators have signaled opposition to Powell’s reappointment, with progressive Elizabeth Warren citing his “failures on regulation, climate and ethics.”
Biden has been focused on winning congressional approval for a giant social welfare bill that would spend $1.8 trillion over 10 years.
He needs the votes of almost all Democrats to make that happen, and appointing a Fed chair who might take a tougher line on banks and climate change could have been seen as a way to build support among progressives.
Brainard, 59 and the lone Democrat on the central bank’s Board of Governors, was seen as a top candidate for that role.
The president said he decided on appointing a Republican chair and Democratic vice chair because “broad bipartisan support is important, especially now in such a politically divided nation.”
He also called for the Fed to “be a leader among central banks globally in addressing climate-related financial risks” as the United States deals with extreme weather events and increases its use of green energy sources.
Jay Bryson, chief economist for Wells Fargo’s corporate and investment bank, said that when it comes to the main questions facing the central bank, such as how soon to raise interest rates, it’s unclear what Brainard might have changed if she was made chair.
“In terms of monetary policy, we think there’s very little daylight between Powell and Brainard,” Bryson said.
Brainard must also be confirmed by the Senate, and would replace Republican Richard Clarida in the role of vice chair.
There are three other vacant seats on the Fed’s board of governors, including the powerful position overseeing banking regulation, and Biden will make his nominations for those spots known by early December, the White House said.