, who guided the Federal Reserve and the nation’s economy through the staggering and sudden Covid-19 recession by implementing unprecedented monetary stimulus, is being nominated for a second term as chairman of the U.S. central bank.
President Joe Biden made the announcement Monday morning following weeks of speculation that a push from progressives might see Fed Governor Lael Brainard get the spot.
Acknowledging the political pressure he faced to nominate a more progressive Democrat than the Republican Powell, Biden said Monday afternoon he settled on Powell because the current economic circumstances present “enormous potential and enormous uncertainty” and require “stability and independence.”
Brainard was designated as vice chair of the board of governors; she had been widely expected to get a separate vice chair for supervision post, which oversees the nation’s banking system. As vice chair for monetary policy, she would succeed Richard Clarida, whose term expires Jan. 31, 2022, and will oversee a wider swath of policy decisions.
“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 an earlier statement.
The nominations next head to the Senate for confirmation.
In making the decision, Biden praised the Powell Fed for its “decisive” action in the early days of the pandemic.
The Fed rolled out an unprecedented array of lending programs while also cutting interest rates back to near zero and instituting a monthly bond-buying program that would increase the central bank’s holdings of Treasurys and mortgage-backed securities by more than $4 trillion.
“Chair Powell has provided steady leadership during an unprecedently challenging period, including the biggest economic downturn in modern history and attacks on the independence of the Federal Reserve,” a White House statement said. “During that time, Lael Brainard – one of our country’s leading macroeconomists – has played a key leadership role at the Federal Reserve, working with Powell to help power our country’s robust economic recovery.”
The announcement coincided withwhile government bond yields were higher across the board.
Markets are watching closely the pace the Fed will follow as it unwinds its massive policy support.
Officials already have indicated they will start paring back the bond purchases, with reductions of some $15 billion per month that would see the program likely conclude in late spring or early summer 2022.
Interest rate hikes are another matter.
Most Fed officials thus far have said they won’t consider raising rates at least until the bond buying taper winds down. However, markets have been looking for a faster timeline for rates, with the initial hike now priced in for June 2022.
“The president chose the status quo for monetary policy and financial regulation,” said Mark Zandi, chief economist at Moody’s Analytics. “The Fed’s going to slowly but steadily take its foot off the monetary accelerator.”
Treasury Secretary Janet Yellen, who also was Powell’s immediate predecessor at the Fed’s helm, lauded Powell for the way he handled the job in the face of the pandemic crisis, which brought the U.S. not only its steepest but also its shortest recession.
“Over the past few years, Chair Powell has provided strong leadership at the Federal Reserve to effectively meet and address unexpected economic and financial challenges, and I am pleased our economy will continue to benefit from his stewardship,” Yellen said.
, D-Mass., who said in September that the Fed’s role in relaxing banking regulations in recent years and that she would oppose his renomination.
Biden recently met with Warren to discuss the appointments, according to a source familiar with the matter.
Two other Democratic senators, Sheldon Whitehouse of Rhode Island and Jeff Merkley of Oregon, also.
. Yellen was the first woman to serve as the Fed’s chair and is the country’s first female Treasury secretary.
“I talked to him about candidates and advised him to pick somebody who is experienced and credible,” Yellen said. “I think that Chair Powell has certainly done a good job.”
Powell is also popular on Capitol Hill, where lawmakers on both sides of the aisle have praised his leadership and amiability since he took over for Yellen in February 2018.