Behind the Powell Pick: One condition is the economy is likely to grow and inflation will fade.
Jerome H. to head the Federal Reserve. President Biden’s decision to re-nominate Powell reflects the president’s belief that despite high inflation, the US economy still has a long way to go by delivering strong benefits to women, black and Hispanic Americans and low-wage workers. To do. Climb into the middle class.
Mr Biden clarified during a White House appearance that he believes Mr Powell is philosophically aligned with his vision that the central bank should continue to support the economy by keeping interest rates low and reaching maximum employment. need to be kept.
“This is an economy where companies have to compete to attract workers, not workers to compete with each other for jobs, where American workers get steady wage growth after decades of stagnation. and where the benefits of economic growth are widely shared by everyone in the country, not just those at the top,” Mr Biden said on Monday.
The president’s decision is also based on their belief that Mr. Powell and Lyle Brainard, the Fed governors whom Biden nominated for vice president on Monday, share their views on stabilizing inflation, while being wary of the labor market. The first should not affect recovery. heals.
This is a gamble on many fronts for the President. He is betting that Mr. Powell will be more aligned with his views on the economy than he is with Republicans in the Senate who have for months condemned rising inflation and called for action from the Fed. Many of those Republicans quickly backed Powell on Monday, expressing hope that he would act swiftly to tackle inflation.
The president is also betting that his team is correct in their economic diagnosis that inflation risk is waning and that marginalized groups of workers still need help to take full advantage of economic growth.
Mr Biden and his colleagues see the recent explosion of inflation, which last month reached its highest level in three decades, largely as a product of crimps in global supply chains – and not a function of monetary policy for which Quick rate increases are required. Central bank.
The decision to re-nominate Mr. Powell and elevate Ms. Brainard is the sum of a wide range of political and economic calculations. Chief among them was choosing the chair with the desire, and bipartisan support, to pursue full employment.
But administration officials say other considerations were also in favor of Mr. Powell’s reappointment, such as the need to maintain the stability of the central bank amid the economic disruption of a pandemic and the record of independence that Mr. Powell enjoyed during his four-year term. which included the withering of former President Donald J. Criticism of Trump, who appointed him chairman.
Mr. Powell appears to have also deflected concerns from liberal Democrats in the eyes of the president and his allies that the Fed has not adequately regulated large banks and other financial institutions under their watch. In making the decision in talks with Biden, Mr. Powell assured the president that he would follow the Fed’s vice president’s lead to oversee – an open position that Mr. Biden has yet to fill – to determine central bank policies. Financial rules in doing.
Mr Biden is expected to announce his choice for that job early next month, and Democrats expect him to nominate someone who will take a tougher stance on Banks, a key demand from Massachusetts Senator Elizabeth Warren. , a progressive who opposes the nomination of Mr. Powell. And called it “dangerous”. Mr Biden recently discussed his Fed selection with Warren, and he has been in regular contact with Senator Sherrod Brown of Ohio, the Democrat who leads the banking committee.
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