President BidenJoe BidenGOP eyes booting Democrats from seats if House flips Five House members meet with Taiwanese president despite Chinese objections Sunday shows preview: New COVID-19 variant emerges; supply chain issues and inflation persist MORE said Monday he renominated Federal Reserve Chair Jerome Powell to preserve the “stability and independence” of the central bank as the U.S. faces challenges on the road to a full economic recovery.
Biden announced Monday he would nominate Powell, a Republican, for another four-year team leading the Fed board of governors despite pressure from the left to replace him. The president also nominated Fed Governor Lael Brainard, the only Democrat on the Fed board and the favorite among liberals to replace Powell, to serve as vice chair.
“I believe having Fed leadership with broad bipartisan support is important, especially now in such a politically divided nation,” said Biden, flanked by Powell and Brainard, in Monday remarks at the White House.
“In times like these we need steady, tested, principled leadership at the Fed. We need people with sound judgment and proven courage to preserve the independence of the Fed. And we need people of character and integrity, who can be trusted to keep their focus on the right long-term goals for our country. I'm confident Jay and Lael are those people,” Biden continued.
Former President TrumpDonald TrumpStowaway found in landing gear of plane after flight from Guatemala to Miami Kushner looking to Middle East for investors in new firm: report GOP eyes booting Democrats from seats if House flips MORE tapped Powell to chair the Fed in 2017, five years after he was appointed to the Fed board by former President ObamaBarack Hussein ObamaHow a biased filibuster hurts Democrats more than Republicans Stephen Sondheim, legendary Broadway songwriter, dies at 91 With extreme gerrymanders locking in, Biden needs to make democracy preservation job one MORE. He previously served as a senior fellow at the Bipartisan Policy Center, the Treasury under secretary for domestic finance under George H.W. Bush, an investment banker, private equity partner and lawyer.
Brainard was also nominated to the Fed by Obama in 2014 after serving as his Treasury under secretary for international affairs. She was also a top economic and trade advisor to former President Clinton.
Biden had spent weeks quietly mulling whether to renominate Powell or replace him with Brainard, sharing little insight into the parameters for his pick. Until his announcement Monday, the president said little beyond stressing the importance of Fed independence, drawing a sharp distinction between himself and his predecessor.
While Trump nominated Powell to lead the Fed in 2017, he spent most of his presidency berating him for refusing to manipulate the value of the dollar to boost the White House’s trade battles with China and Europe. Trump once compared Powell disfavorably to Chinese President Xi Jinping and frequently threatened to fire him, but the Fed chair largely ignored the president’s attacks.
Biden cited Powell’s refusal to bend to Trump’s will as proof of his independence as he faces another crucial test: the ongoing surge of inflation.
Consumer prices rose by 6.2 percent in the year leading into October, the fastest annual rate in 30 years, due largely to supply chain snarls and other pandemic-related constraints. While unemployment, economic growth, consumer spending and corporate profits have all recovered substantially, higher consumer prices have spurred intense pressure on both the White House and Fed.
Biden touted the broader strength of the U.S. economy and praised both Powell and Brainard for stifling the initial blow of the pandemic and supporting a strong recovery. He noted that while most countries are struggling with higher inflation, none is doing so with a stronger economy than the U.S.
“Like every country in the world, we have to deal with these issues of rising costs. But let’s remember, we have the skill and tools to get it under control. While other countries are stumbling out of this pandemic, we're racing ahead,” Biden said, arguing the U.S. can attack inflation “from a position of strength.”
While Biden emphasized the importance of independence when renominating Powell, his decision also cements a general alignment between the White House and Fed on how to tackle inflation and foster a full recovery.
Powell, like Biden, expects inflation to ease as the supply chain disruptions and pandemic-related constraints on the labor force continue to fade. He has also warned against pulling back on stimulus too quickly and abruptly while millions of Americans have yet to return to the workforce.
“Jay is a believer in the benefits of what economists call maximum employment. That's an economy where companies have to compete to attract workers, instead of workers competing with each other for jobs,” Biden said.
Under Powell, the Fed adopted a strategy that called for holding off on interest rate hikes until inflation was on track to run above its 2 percent annual target. The new approach was intended to make sure the job market and wage growth to become as strong as possible before the Fed stepped in to slow the economy.
“Jay undertook a landmark review to reinforce the Federal Reserve's mission toward delivering full employment. “We’re making strong progress toward that goal now and believe Jay is the right person to see us through and finish that effort. while also addressing the threat of inflation.”
Though most economists expect the recent surge of inflation to fade, high price growth has tested the Fed’s commitment to its new approach and boosted pressure on the bank to act.
While many Republican lawmakers and some moderate Democrats have questioned the Fed’s new approach to inflation, most are expected to back Powell. He was confirmed with 84 votes in 2018 and should face little trouble winning another term, even in a polarized Senate split evenly between Democrats and Republicans.
Biden’s decision to embrace continuity also gives him a chance to make deeper changes to the Fed board. With Brainard tapped to replace Fed Vice Chair Richard Clarida, another Trump-appointed Republican, the president will have three vacant positions on the seven-person Fed board to fill by January.
Along with Clarida’s spot, Biden can name a new member of the Fed board to replace Fed Governor Randal Quarles, the former Fed vice chair of supervision who will leave the bank next month. There is also a vacant seat on the Fed board left unfilled by Trump.
“While Jay and Lael bring continuity stability to the Fed, my additions will bring new perspectives and new voices. I also pledge that my additions will bring new diversity to the Fed, which is much needed and long overdue in my view,” Biden said.