Monday, August 15, 2022

Biden will keep Powell as Fed chairman, Brainard will be vice chairman

WASHINGTON (AP) – President Joe Biden announced Monday that he is nominating Jerome Powell for a second four-year term as chairman of the Federal Reserve, bolstering Powell’s leadership of the economy during a violent pandemic recession in which the Fed’s ultra-low interest rate policies helped to build confidence. and revitalize the labor market.

Biden also said he would nominate Lael Brainard, the only Democrat on the Fed’s Board of Governors and a preferred alternative to Powell among many progressive supporters, as the second-most vice chairman.

A separate position as deputy chairman for oversight, the position of banking regulator, remains vacant, as do the other two seats on the Fed’s board. According to the president, these positions will be filled in early December.

“If we are to build on this year’s economic success, we need the stability and independence of the Federal Reserve – and I am fully confident, after their fiery trial over the past 20 months, that Chairman Powell and Dr. Brainard will provide the strong leadership our country needs.” Biden said in a statement.

Biden’s decision, taken after careful consideration, underscores continuity and bipartisanship at a time when rising inflation burdens households and heightens the risks to economic recovery. Backing Powell, the first Republican inaugurated by President Donald Trump, Biden dismissed complaints from progressive supporters that the Fed has loosened banking regulations and has been slow to incorporate climate change in its banking supervision.

If approved by the Senate, Powell will remain one of the most influential economic officials in the world. By raising or lowering the base interest rate, the Fed seeks to either cool or stimulate growth and hiring, as well as maintain price stability. His efforts to manage the world’s largest US economy usually have global implications.

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The Fed’s short-term rate, which has been pegged to zero since the pandemic hit the economy in March 2020, is affecting a wide range of consumer and business borrowing, including mortgages and credit cards. The Fed also oversees the country’s largest banks.

Powell will face a difficult and high-risk balancing act during his second term in office, starting in February: rising inflation poses a challenge to millions of families. darken the economic recovery and undermine the Fed’s mandate to maintain price stability. But with the economy still surpassing 4 million jobs, falling short of pre-pandemic levels, the Fed has yet to fulfill its second job-boosting mandate.

If the Fed moves too slowly to raise rates, inflation could accelerate further and force the Fed to take more draconian steps later to curb it, potentially triggering a recession. However, if the Fed raises rates too quickly, it could hinder recruitment and economic recovery.

Powell’s re-nomination must be approved by a vote by the Senate Banking Committee and then confirmed by the full Senate, which is considered likely.

Powell, a 68-year-old lawyer by training, was appointed to the Federal Reserve Board in 2011 by President Barack Obama after building a lucrative private equity career and holding a number of positions in the federal government.

Unlike his three immediate predecessors, Powell does not hold a doctorate. on economics. However, he received overall high marks for managing arguably the most important financial position in the world, especially for his response to the coronavirus-related downturn. In the spring of 2020, the economic downturn quickly destroyed 22 million jobs and sparked panic in financial markets.

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The ensuing spike in inflation forced Fed Powell to cut its economic stimulus earlier than he had anticipated. At its last meeting in early November, the central bank said it would begin to cut back on monthly bond purchases. and will probably finish them by mid-2022. These purchases were aimed at lowering the cost of long-term loans in order to stimulate borrowing and spending.

A quick pullback in bond purchases will allow the Fed to raise rates much earlier than its policies anticipated last spring, when the rate hikes were predicted to begin in late 2023. In September, Fed officials raised their forecast to the end of 2022.

Powell has also escaped much of the blame, at least on Capitol Hill, for spiking inflation to its three-decade peak, although one of the Fed’s mandates is to keep prices stable by controlling interest rates. Instead, Republicans in Congress have pointed to President Joe Biden’s economic policies as the main culprit, and some have already approved Powell’s reappointment.

However, Powell’s Fed has come under some criticism in recent weeks from economists for being too slow to realize that inflation remains high and the need to act as soon as possible to raise rates.

Nation World News Desk
Nation World News Desk
Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.
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