Biden chose Jerome Powell (Jerome Powell) for the second term of the Federal Reserve because the United States is fighting the new crown virus and inflation

Jerome PowellThrough the implementation of unprecedented monetary stimulus measures, the Fed and the U.S. economy have guided the Fed and the U.S. economy through the shocking and sudden Covid-19 recession, and has been nominated for re-election as the chairman of the U.S. Central Bank.

President Joe Biden announced the news on Monday morning. The speculation in the previous weeks was that the advancement of progressives might allow Fed Governor Lyle Brainard to obtain the position.

Brainard will serve as the vice chairman of the board of directors; it is widely expected that she will receive a separate supervisory vice chairman responsible for overseeing the national banking system. As vice chairman, she will succeed Richard Clarida (Richard Clarida), whose term will expire on January 31, 2022.

Read more: Who is Lael Brainard?

“As I said before, we can’t just return to the pre-pandemic state. We need to make our economy recover better. I believe Chairman Powell and Dr. Brainard are focused on maintaining low inflation, stable prices, and providing full employment. Will make our economy stronger than ever before,” Biden said in a statement.

The nomination will then be submitted to the Senate for confirmation.

In making this decision, Biden praised the “decisive” actions taken by the Powell Fed in the early stages of the pandemic.

The Federal Reserve has launched an unprecedented series of loan programs, and at the same time reduced interest rates to near zero, and formulated a monthly bond purchase program, which will increase the central bank’s holdings of U.S. Treasury bonds and mortgage-backed securities by more than $4 trillion .

A White House statement said: “Chairman Powell has played a stable leadership role during unprecedented challenging times, including the largest recession in modern history and attacks on the independence of the Federal Reserve.” “During that time, our country was the leader. One of the macroeconomists, Lael Brainard, played a key leadership role at the Federal Reserve, working with Powell to help drive our country’s strong economic recovery.”

The announcement coincided with Boost to the stock market The government bond yields have gone up across the board.

The market is closely watching the steps the Fed will follow when it lifts its large-scale policy support.

Officials have stated that they will begin to reduce bond purchases by about $15 billion per month, which will make the program likely to end in late spring or early summer of 2022.

Raising interest rates is another matter.

So far, most Fed officials have stated that they will not consider raising interest rates, at least until bond purchases are gradually over. However, the market has been looking for a faster interest rate schedule, and the initial rate hike is now priced in June 2022.

“The President chose the status quo for monetary policy and financial regulation,” said Mark Zandi, chief economist at Moody’s Analytics. “The Federal Reserve will slowly but steadily stop the currency accelerator.”

Treasury Secretary Janet Yellen is also Powell’s immediate predecessor at the helm of the Federal Reserve. She praised Powell’s handling of work in the face of the pandemic crisis, which not only brought the worst recession to the United States, but also brought it The shortest recession.

“In the past few years, Chairman Powell has provided strong leadership at the Federal Reserve to effectively respond to and respond to unexpected economic and financial challenges. I am very happy that our economy will continue to benefit from his management,” Yellen said.

Controversy in recent days

Although Powell occupied this day, it was not without controversy.

The Federal Reserve has recently come under fire for its ethics scandal, and many of its officials traded stocks when the agency implemented policies aimed at boosting the market. Powell revealed that he owns municipal bonds that the Fed is also buying, and he also buys and sells funds related to a wide range of stock market indexes.

At the same time, the Fed has been hit by a faster-than-expected inflation rate—in fact, this is the fastest rate in 30 years. Since September 2020, the Fed’s official policy has been to allow inflation to be slightly higher than the standard 2% target while allowing full and inclusive employment, but prices have been far above this level.

Powell insisted that once the pandemic-related factors return to normal, inflation will cool down. But recent data has raised questions about the so-called average inflation target, which marks a historic shift in central bank monetary policy.

Inflation was also accompanied by a rapid economic recovery and the unemployment rate fell from 14.8% at the peak of the pandemic to the current 4.6%.

The White House statement stated that the recovery “proves the success of the President’s economic agenda, and also the decisive action taken by Chairman Powell and the Federal Reserve to mitigate the effects of the pandemic and get the US economy back on track.”

Brainard has become a key force in the race to lead the Fed over the next four years. She put forward points on several issues that are important to the Biden administration, especially the Fed’s need to protect the banking system from destructive climate change events.

As the former deputy secretary of the Treasury during the Obama administration, Brainard has also been a staunch supporter of the digital dollar as a means of opening up the financial system to those without bank accounts.

The White House statement emphasized the importance of the Fed’s progress in the coming years.

Biden said that Powell and Brainard “also deeply believe with me that urgent action is needed to deal with the economic risks posed by climate change and maintain a leading position in our financial system.”

“Fundamentally speaking, if we want to continue to build on our economic success this year, we need the stability and independence of the Federal Reserve. After the fierce trials of the past 20 months, I am fully confident that Chairman Powell and Dr. Brainard Will provide the strong leadership that our country needs,” he added.

Biden has more work to do on the Fed’s side: there is a vacant position on the board of directors, and the vacancy for Clarida will need to be filled in January. He also needs to appoint a vice chairman responsible for oversight, Randal Quarles has held this position until his term expires in October. The White House said on Monday that these measures will be announced in early December.

Congress’s initial response to Monday’s news was positive.

The key Senate Banking Committee Chairman, Sherrod Brown (D-Ohio), who will first hear the nomination, said: “I look forward to working with Powell to stand up against Wall Street, stand up for the workers, and let them share in the prosperity they create.”

Patrick Toumi, a Republican from Pennsylvania, said he would support Powell, even though he pointed out that he had disagreements with the central bank’s policy.

Fight back from Covid

President Donald Trump appointed Powell to this position in 2018, which is a bit unexpected. Trump chose to ignore then Chairman Janet Yellen. This was an unusual move because Fed leaders are rarely removed after one term. Former President Barack Obama initially appointed Powell as governor in 2014 for a 14-year term.

Although Trump nominated Powell, he later severely criticized the Fed chairman when the Fed raised interest rates seven times in 2017 and 2018. Economic recovery.

As for Brainard, it is widely expected that she will be appointed as the vice chairman of supervision, which is an important position for the Federal Reserve to supervise the national banking system.

The Federal Reserve is mandated by Congress to complete two tasks: maximizing employment in the United States and maintaining stable inflation. Its leader, the president, is nominated by the president and votes on how to adjust interest rates, supervise the country’s largest bank, and monitor the health of the economy.

In response to the soaring unemployment rate and economic recession that began in the spring of 2020, the central bank significantly cut interest rates and began to purchase approximately US$120 billion in US Treasury bonds and mortgage-backed securities each month. It has also developed various loan programs designed to keep the fixed-income market under tremendous pressure in the early stages of the pandemic.

Economists believe that this rapid and large-scale response stabilized financial markets and subsequently suppressed long-term interest rates. Lower interest rates make it easier for companies to obtain loans to build new factories, or make it easier for individuals to buy houses or cars.

Mike Feroli, chief U.S. economist at JPMorgan Chase, said via e-mail: “Under Powell’s leadership, the Federal Reserve pays more attention to letting the economy operate with maximum employment.”

“This is a goal that progressive economists have been advocating for a long time, and may be in line with Biden’s agenda.”

Treasury Secretary Janet Yellen is one of Biden’s senior economic advisers and his Fed’s nominated adviser, she told CNBC earlier this month Satisfied with the work of the Federal Reserve ChairmanYellen was the first woman to serve as the chairman of the Federal Reserve and the country’s first female finance minister.

Yellen said: “I talked to him about the candidate and suggested that he pick an experienced and credible person.” “I think Chairman Powell did a good job.”

Powell is also very popular on Capitol Hill. Since he succeeded Yellen in February 2018, lawmakers from both parties have praised his leadership and amiability.

This news may disappoint progressives, including senators. Elizabeth Warren, D-Mass., he stated in September that the Fed’s role in deregulating banking supervision in recent years Make Powell a “dangerous man” And she will oppose his renomination.

According to people familiar with the matter, Biden recently met with Warren to discuss these appointments.

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