Federal Reserve Chairman Jerome Powell testifies during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington, DC, on September 28. Powell was reappointed to the office. second term when leading the Fed, a move that should be welcomed by the market.
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Federal Reserve Chairman Jerome Powell testifies during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington, DC, on September 28. Powell was reappointed to the office. second term when leading the Fed, a move that should be welcomed by the market.
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President Biden has chosen to keep Jerome Powell as Chairman of the Federal Reserve for a second term – a move that is likely to reassure financial markets, despite objections from some progressives in the party. Presidential.
Biden also nominated Fed governor Lael Brainard to serve as Vice President. Brainard was once considered a leading candidate to replace Powell.
“Powell and Brainard share the Administration’s focus on ensuring economic growth that broadly benefits all workers,” the White House said in a statement.
Powell, a Republican, was initially appointed to the Fed’s executive board by former President Barack Obama, and elevated to the chair by former President Donald Trump.
As chairman, Powell directed the central bank’s aggressive response to the economic turmoil caused by the pandemic, cutting interest rates to near zero and rapidly launching a series of lending programs. emergency.
Powell also oversaw a Fed’s new policy, which directs the central bank to be patient in raising interest rates, in the hope of boosting employment growth more broadly.
That policy was passed in 2020 after years of inflation falling short of the Fed’s 2% target, but it is now being tested as prices soar, pushing inflation to a 31-year high.
The Ministry of Labor said October prices are 6.2% higher than a year ago, the strongest increase since 1990.
Powell and his colleagues believe that today’s price increase is largely the result of temporary factors tied to the pandemic, which should ease on its own as the health outlook improves. That is a view that has been challenged by a number of prominent economists and Democrats such as former US Treasury Secretary Larry Summers.
The central bank must weigh the risks of suffering higher inflation against the cost of job loss growth with higher interest rates, at a time when millions of people remain unemployed.
“It is extremely important that we do that,” Powell said recently at a conference sponsored by the Reserve Bank of South Africa. “I’m confident we’ll do that in the next year or so. I think in the meantime it’s going to be extremely challenging, certainly in the short term.”
Senator Elizabeth Warren (D-MA) speaks with Federal Reserve Chair Jerome Powell during a Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act in Washington, DC , on September 28. At the hearing, Warren said she opposes a second term for Powell as Fed Chair and calls him “dangerous”.
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Senator Elizabeth Warren (D-MA) speaks with Federal Reserve Chair Jerome Powell during a Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act in Washington, DC , on September 28. At the hearing, Warren said she opposes a second term for Powell as Fed Chair and calls him “dangerous”.
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Powell has faced opposition from progressives
Radical critics, including Sen. Elizabeth Warren, D-Mass., have accused Powell of falsifying banking regulations passed as a result of the financial crisis. At a recent Senate Banking Committee hearing, Warren described Powell as “a dangerous person.”
However, that criticism did not attract much traction. The Dodd-Frank co-sponsors behind those banking regulations, former Sen. Chris Dodd, D-Conn., and former Representative Barney Frank, D-Mass., were protect Powell and said he deserves a second term.
Powell also had to navigate a moral controversy, after it was reported this fall that two former presidents of regional Federal Reserve banks were actively trading stocks and other securities last year, at a time when the central bank are heavily involved in the financial markets.
Former Dallas Fed President Robert Kaplan and former Boston Fed President Eric Rosengren retired last month, after the deals came to light. Both men deny any wrongdoing, but Kaplan admits the controversy could distract the central bank. Rosen said he resigned due to health reasons.
The Fed’s inspector general was looking into the transactions of the two men, which appeared to be in compliance with central bank rules at the time. The Fed has since adopted stricter rules, limits individual stock and bond trading and requires disclosure of any transactions within 30 days.
“We have to have the complete confidence of the American people that we are always working in their interest,” Powell said, describing the new rules.
In nominating Powell for a second term, Biden is following a tradition that Fed seats generally remain unchanged, even if the party that controls the White House does. It is a way to protect the political independence of the central bank. Trump broke with that tradition when he replaced then-Fed Chairwoman Janet Yellen, a Democrat now Treasury Secretary, with Powell four years ago.
Powell’s nomination must be confirmed in the Senate, where he is expected to enjoy broad bipartisan support.
