WASHINGTON -- President Joe Biden said Monday he is nominating Jerome Powell for a second four-year term as Federal Reserve chairman, endorsing his stewardship of the economy through a pandemic recession in which the Fed's ultra-low rate policies helped bolster confidence and revitalize the job market.
Biden also said he would nominate as vice chairwoman Lael Brainard, the lone Democrat on the Fed's Board of Governors and the preferred alternative to Powell as Fed leader among many progressives.
The president's decision strikes a note of continuity and bipartisanship at a time when surging inflation is burdening households and raising risks to the economy's recovery. In backing Powell, a Republican who was elevated to his post by President Donald Trump, Biden brushed aside complaints from progressives that the Fed has weakened bank regulation and has been slow to take account of climate change in its supervision of banks.
"When our country was hemorrhaging jobs last year, and there was panic in our financial markets, Jay's steady and decisive leadership helped to stabilize markets and put our economy on track to a robust recovery," Biden said, using Powell's nickname.
Inflation has picked up sharply this year, with consumer prices increasing at the fastest pace in more than three decades in the year through October. The central bank is charged with keeping consumer prices stable while striving for maximum employment, and striking that balance could require difficult policy choices in the months ahead. The economy is still 4 million-plus jobs shy of its pre-pandemic level.
While taming inflation falls to the Fed, Biden has been suffering politically as prices rise for food, gas and airplane tickets.
Biden said he was certain that both Powell and Brainard would work to stabilize inflation and keep the economic recovery on track.
Powell, who appeared alongside the president and Brainard at the White House, acknowledged the stakes. "We know that high inflation takes a toll on families, especially those less able to meet the higher costs of essentials like food, housing and transportation," he said, adding that the Fed would "use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched."
"I am pleased to see Jay Powell renominated as the Chairman of the Federal Reserve Board of Governors," said U.S. Rep. French Hill, R-Ark. "Over the past several years he has proven his dedication towards working to ensure the Federal Reserve's independence as a central bank, its dual mandate for price stability and maximum employment, and its oversight of the United States financial system. I am confident that Chairman Powell will continue to lead the Federal Reserve in the right direction, and help restabilize the economy in the midst of the current inflation crisis."
If confirmed, Powell, whose second term would begin in February, would remain one of the world's most powerful economic officials. By either raising or lowering its short-term interest rate, the Fed seeks to either cool or stimulate growth and hiring, and to keep prices stable. Its efforts to direct the U.S. economy, the largest in the world, typically have global consequences.
The Fed's benchmark rate, which has been pegged near zero since the pandemic hammered the economy in March 2020, influences a wide range of consumer and business borrowing costs, including for mortgages and credit cards. The Fed also oversees the nation's largest banks.
The spike in inflation has forced the Fed to dial back its economic stimulus sooner than envisioned. At its latest meeting in early November, the central bank said it would start reducing this month its $120 billion monthly bond purchases and likely end them by mid-2022. Those purchases have been intended to keep longer-term borrowing costs low to spur borrowing and spending.
For months, Powell characterized inflation as "transitory," but more recently, he conceded that higher prices have persisted longer than expected. At a news conference this month, Powell acknowledged that high inflation could last into late summer 2022.
BRAINARD BACKERS
Brainard's elevation to the Fed's No. 2 position follows the key role she played in the Fed's emergency response to the pandemic recession. She is part of a "troika" of top policymakers that includes Powell and current Vice Chairman Richard Clarida, whom she will replace in February.
For months Powell was the favorite to be reappointed, but a vigorous campaign by environmental and public interest groups in support of Brainard clouded the picture in recent weeks. Critics, including Sen. Elizabeth Warren, D-Mass., argued Powell had loosened bank regulations that were put in place after the 2008-2009 financial crisis.
And two other senators expressed opposition to Powell last week because they said he was insufficiently committed to using the Fed's regulatory tools to combat global warming.
Brainard, meanwhile, cast 20 dissenting votes against financial rule changes in the past four years. In March 2020, she opposed a regulatory change that she said would reduce the amount of reserves large banks were required to hold to guard against losses. She has also spoken more forcefully than Powell on ways the Fed can confront global warming.
Biden still has the opportunity to fill three more positions on the Fed's board of governors, including the vice chairman for supervision, a top bank regulatory post. Those positions will be filled in early December, Biden said.
AIMING FOR STABILITY
Biden acknowledged that some Democrats encouraged him to pick a new Fed leader for a "fresh start." But he said he wanted to go in a different direction.
"We need stability and independence at the Federal Reserve," he said. "I believe Fed leadership with broad and bipartisan is important, especially now, in such a politically divided nation."
Biden praised Powell for his efforts to achieve maximum employment, but did not press him on inflation, which has emerged as the biggest economic threat to his administration. Biden said the U.S. economy is in the midst of a "historic recovery" that gives the Fed an opportunity to "attack inflation from a position of strength, not weakness."
Powell said "we know that high inflation takes a toll on families, especially those less able to meet the higher costs of essentials, like food, housing and transportation." He pledged to use the Fed's tools -- principally raising interest rates -- "to prevent higher inflation from becoming entrenched."
Powell's renomination is widely expected to be approved by the Senate Banking Committee and then the full Senate.
DEMOCRATIC SUPPORT
Some liberal Democrats such as Sen. Sherrod Brown of Ohio, chairman of the Banking Committee, have endorsed Powell, as have moderate Democrats, including Sen. Jon Tester of Montana. He was also endorsed by Sen. Pat Toomey of Pennsylvania, the senior Republican on the panel, and will likely receive widespread support from Republicans.
Wall Street cheered the renomination, with stock prices rallying and measures of fear in the market easing immediately after the announcement.
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The 68-year-old lawyer was nominated for the Fed's Board of Governors in 2011 by President Barack Obama after a lucrative career in private equity and having served in a number of federal government roles.
Unlike his three immediate predecessors, Powell lacks a Ph.D. in economics.
Brainard was an architect of the Fed's new policy framework, adopted in August 2020, under which it said it would no longer raise rates simply because the unemployment rate had fallen to a low level that could spur inflation. Instead, the Fed said it would await actual evidence that prices are rising.
Information for this article was contributed by Christopher Rugaber and Josh Boak of The Associated Press and by Jeanna Smialek and Jim Tankersley of The New York Times.
