President Biden announced Monday that he will nominate Jerome Powell to a second term as chairman of the Federal Reserve, signaling that he believes the battle-tested central bank chief, who navigated the U.S. economy through the depths of the worst recession in nearly a century, is the best person for one of the most high-stakes jobs in the world.
The announcement ends months of speculation over whether Biden would stick with Powell, a Republican nominated by former President Donald Trump in 2017, or attempt to reshape the central bank by tapping Lael Brainard, the sole Democrat on the Fed's Board of Governors, to lead it. Only one Democrat has been selected for the top post in more than three decades.
Brainard has instead been chosen as vice chair of the board of governors; she will succeed Richard Clarida, whose term expires Jan. 31, 2022. The nominations now head to the Senate for confirmation.
The Fed chair – one of the most powerful players in Washington, with the ability to dictate the pace of economic growth – is typically nominated for a second term, often to reinforce the central bank's independence from politics. Powell's four-year term was slated to end in February.
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Choosing whom to tap is one of the most consequential economic decisions that Biden has made during his first year in the Oval Office, particularly as the White House seeks to quell growing voter unrest about the state of the U.S. economy amid surging prices for everything from meat to gasoline to clothing.
"As I’ve said before, we can’t just return to where we were before the pandemic, we need to build our economy back better, and I’m confident that Chair Powell and Dr. Brainard’s focus on keeping inflation low, prices stable, and delivering full employment will make our economy stronger than ever before," Biden said in a statement.
Members of Biden's economic team, including Treasury Secretary Janet Yellen, favored Powell for a second term after he steered the U.S. through the coronavirus pandemic Biden had previously lauded Powell for the "decisive" action the central bank took in the early days of the pandemic, which many economists credited with staving off a deeper and more painful downturn.
But the move is sure to infuriate some progressive lawmakers, who had urged Biden to replace Powell with a candidate more focused on mitigating climate change risks and who favored stricter bank regulation. Under Powell, the Fed reduced certain regulations on big banks, including making it easier for them to make risky trades and easing tests that examine if they could withstand another major economic downturn.
Powell and Brainard are remarkably aligned on monetary policy and have both argued that a recent inflation surge – prices rose 6.2% over the past year, the government reported recently – is likely to abate as pandemic-induced disruptions in the supply chain ease. But Brainard, unlike Powell, has been a vocal advocate for stricter regulation of banks, and has dissented on 23 Fed board votes since Powell became chairman in 2018, garnering her approval from Democratic lawmakers.
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