Biden Keeps Powell as Fed Chair and Proposes Brainard as Vice Chair

US President Joe Biden has finally re-elected Jerome Powell for a second four-year term as chairman of the Federal Reserve, while elevating strong-sounding Governor Lael Brainard to the vice presidency. . .Biden thus clears doubts and maintains coherence in the structure of the US central bank as the country grapples with the highest inflation in decades and the lingering effects of COVID-19 on the economy.

The move, announced by the White House on Monday, rewards Powell for helping rescue the US economy from the pandemic and tasks him with protecting that recovery from a surge in consumer prices. Powell, a Republican, faces what will likely be a smooth confirmation in the Senate, where he was backed for his first term as president by an 84-13 vote and whose members he subsequently worked hard to woo.

Brainard will replace Richard Clarida as vice president and could face opposition from Senate Republicans for confirmation. She was interviewed by Biden for the position of president and was considered a strong candidate for the separate position of vice president of supervision, which remains vacant.

Biden plans to announce this appointment along with others to vacant seats on the Board of Governors beginning in early December, the White House has said.

“Clearly, the market is looking at the likelihood that the Fed will increase the pace of tapering and move forward to the timing of the first rate hike now that Powell” has been re-elected, said Kathy Jones, chief fixed income strategist at Charles Schwab at Bloomberg after the news broke. Investors expect the Fed to raise rates from close to zero in June, based on prices in the interest rate futures markets.

Biden’s choice of Powell will likely also win investors’ approval by ensuring continuity at the central bank as it begins to withdraw ultra-accommodative monetary policy amid the challenges of persistent inflation. From Bankinter they consider that this movement “is positive for the market because it reduces the uncertainty about changes in the course of the monetary policy”.

The futures of the American actions increased the gains and Wall Street has opened with gains of more than half a percentage point. Treasury bonds stretched their losses on the news from the Fed (the T-Note yield has reached 1.6%). Following the news, the euro has extended its losses in its cross against the dollar by more than 0.40% to 1.1243 ‘greenbacks’ per euro.

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

Powell, 68, has had bipartisan support, including from Treasury Secretary Janet Yellen and other Democrats. Nonetheless, progressive Democrats like Massachusetts Sen. Elizabeth Warren lobbied Biden to elect someone more aligned with them in overseeing banks and fighting climate change. Powell also had to respond to an ethical scandal following trade disclosures from some senior Fed officials.

“Biden has ignored calls from progressives in his party to replace Powell as Fed chairman,” ING analysts note. “This must have been an important consideration given the president’s frustration in garnering legislative support due to slim majorities in the House and Senate. Biden would not have wanted another attrition battle to derail him from pursuing his political agenda, as this function of the Fed requires congressional approval. ”

Biden, in a written statement, has called the economic recovery thus far a “testament to the economic agenda that I have followed and the decisive action that the Federal Reserve has taken under Powell and Brainard to help steer us through. the worst recession in modern US history and put us on the road to recovery. ”

Biden added: “I am confident that President Powell and Dr. Brainard’s approach to keeping inflation low, prices stable and full employment will make our economy stronger than ever.” He has also highlighted what he has called his “deep conviction that urgent action is needed to address the economic risks posed by climate change, and to anticipate emerging risks in our financial system.”

Differences between Powell and Brainard
Powell and Brainard have similar views on monetary policy, but differ on bank regulation, as Brainard opposes every step Powell takes to ease some of the tough restrictions placed on banks in the aftermath of the financial crisis. .

Brainard, 59, was named Fed Governor in 2014 by President Barack Obama. In 2020, Biden considered choosing her as Secretary of the Treasury, before choosing Janet Yellen. A Harvard University graduate, Brainard served in Bill Clinton’s White House as a deputy national economic adviser. In 2009, under Obama, she joined the Treasury and became Under Secretary for International Affairs in 2010.

 

 

 

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Summary

US President Joe Biden has finally re-elected Jerome Powell for a second four-year term as chairman of the Federal Reserve, while elevating strong-sounding Governor Lael Brainard to the vice presidency

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