Orignally published on 2021-11-22 14:36:00 by www.cbsnews.com
President Joe Biden plans to renominate Federal Reserve Chair Jerome Powell for a second term at the helm of the U.S. central bank. The move amounts to an endorsement of Powell’s stewardship of the economy through a brutal pandemic recession, with monetary policy seen as having helped revitalize the job market and push the stock market to record highs.
Biden also said he would nominate Lael Brainard, the lone Democrat on the Fed’s governing body, as vice chair. Brainard was the preferred alternative to Powell among many progressives.
Stock markets rose on the announcement, which largely preserves the status quo. The S&P 500 rose 0.9% as of 10:00 a.m. Eastern time; the Dow and the tech-heavy Nasdaq rose 0.8%.
“The selections mean continuity for policy at a critical time for economy. This should be well received by the financial markets,” economists at Oxford Economics said in a research note.
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.
“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,” Mr. Biden said in a statement. “I have full confidence after their trial by fire over the last 20 months that Chair Powell and Dr. Brainard will provide the strong leadership our country needs.”
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.
Last week, top Democratic senators Sheldon Whitehouse and Jeff Merkley wrote to Mr. Biden to oppose Powell’s renomination, saying he “refuses to recognize climate change as an urgent and systemic economic threat.”
Powell’s term ends on February 5, 2022. His nomination for a second term is expected to enjoy a smooth passage both in the Senate Banking Committee and the wider chamber, which must hold a vote.
If reconfirmed to his post, 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 beensince the 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 maximizing 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.
CBS News’ Irina Ivanova contributed reporting.