Biden announced he will be renominating Powell for a second term as Fed chair and will nominate Fed Governor Lael Brainard as vice-chairman. Biden was widely expected to nominate either Powell or Brainard for the position. Powell was initially nominated by former President Donald Trump in 2017, but Trump was highly critical of Powell during his first term in the position.
Why It’s Important
The Federal Reserve is navigating some difficult economic conditions at the moment. The U.S. economy is still recovering from the 2020 pandemic, but inflation has recently hit multi-year highs. The Fed has insisted elevated inflation will be “transitory,” but it began tapering its $120 billion in monthly asset purchases by $15 billion per month in November.
In a statement, Biden said he will not be satisfied with simply getting the economy back to where it was before the pandemic.
“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.
The Fed has said it will maintain its target funds rate range of between zero and 0.25 percent through at least 2022. However, the bond market is currently pricing in a 76.6 percent chance of at least one rate hike by June 2022.
Investors tend to hate uncertainty and love the status quo, so it’s not surprising the stock market initially reacted positively to Powell’s nomination. Given Democrats currently control both houses of Congress and Republicans approved Powell’s nomination under Trump, Powell will likely not see too much resistance from Congress.
By Wayne Duggan
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