WASHINGTON, Nov.22 (Reuters) – US President Joe Biden on Monday appointed Federal Reserve Chairman Jerome Powell for a second four-year term, positioning the former investment banker to continue the most recent monetary policy overhaul. consequent since the 1970s and finish guiding the economy out of the pandemic crisis.

Lael Brainard, the Federal Reserve board member who was the other top candidate for the job, will be vice president, the White House has said.

Together, the appointments pair two monetary policy veterans and aides with a recent Fed policy overhaul, which has shifted the focus on jobs from the focus on inflation established earlier. about four decades. Their challenge will be to maintain job growth in the United States while ensuring that the recent high inflation does not take hold.

“We have gone from a closed economy to an economy that dominates the world in terms of economic growth,” Biden said in a White House speech with the nominees.

Citing Powell’s “stable leadership” which calmed panicked markets and his belief in monetary policies that support as many jobs as possible, Biden said “I think Jay is the right person to come with us.”

The United States is still grappling with the impacts of the pandemic, including inflation, he said, but the country has made “huge strides”, including creating nearly 6 million jobs since his swearing-in and raising wages – positive signs that the Federal Reserve bears witness to.

“I respect Jay’s independence,” Biden said, speaking directly to critics of his own Democratic Party who wanted him to replace Powell, a Republican, with a Democrat. “At this time of enormous potential and enormous uncertainty for our economy, we need stability and independence at the Federal Reserve.”

Powell, 68, and Brainard, 59, will both need to be confirmed in their leadership roles of the Fed by the Senate, currently controlled by Biden’s Democratic Party but tightly divided. The president has so far left several other Fed positions open, including that of vice president of supervision, which he could fill as early as next month and which could be used to strengthen banking regulation, improve diversity and make other changes that his supporters urged. for the Fed.

But for the Fed’s basic monetary policy – managing inflation and setting interest rates as the economy reopens after the pandemic – Biden opted for continuity.

“They are veterans and mature officials and there has been very little difference between them” on monetary policy said Adam Posen, president of the Peterson Institute for International Economics.

Together, Powell, a moderate Republican raised by former President Donald Trump, and Brainard, who served in former Democratic administrations, “lend potentially non-partisan credibility to a more realistic assessment of inflation risks” facing states – United are facing.

This reassessment could mean interest rate hikes sooner rather than later if inflation, which both have promised to fight, proves to be more persistent than expected.

“We know high inflation is weighing on families,” Powell said in brief remarks at the White House event where Biden announced the appointments.

Brainard also pledged to support a growing economy “that includes everyone” and a Fed that “serves all Americans in every community.”

US stocks hit record highs after the news broke. Yields on treasury bills also rose and the dollar strengthened.

Powell’s reappointment had been encouraged by a cross-section of investors and economists with both conservative and liberal leanings, and was welcomed by members of Congress from both parties.

The Fed’s aggressive actions at the onset of the coronavirus pandemic in early 2020 have been hailed as averting potential depression. Some later praised the emphasis on jobs in the new policy framework launched just over a year ago, and others argued that it would be too risky to overthrow the Fed chairmanship. during a sensitive transition of emergency measures taken during the health crisis.

CHANCE TO CONFIRM A LEGACY

Powell’s second term would begin in early February, and the months ahead will be crucial in determining whether his legacy will be that of the Fed chairman who put jobs at the center of Fed policy, or the one who left it behind. inflation skyrocket and recover as a chronic problem.

Powell, who joined the Fed as governor in 2012, had no plans to be named president when Trump was elected. With a pre-Fed career that had included eight years as a partner at The Carlyle Group, one of the world’s largest private equity firms, and no formal training in economics, he had instead considered VP for a supervisory position finally held by Randal Quarles.

He was confirmed as chairman of the Fed on an 84-to-13 vote, with Kamala Harris, now Biden’s vice-chairman, among those opposing him.

He quickly clashed with Trump, who launched unprecedented public attacks on Powell on Twitter and in frequent media appearances. At one point, Trump called Powell an “enemy” of the United States for raising interest rates and explored if he could fire him.

Powell not only survived, but arguably grew up in the job.

Initially hawkish as governor, when he took the helm of U.S. monetary policy, he initially viewed himself as a student, paying particular attention to arguments that the Fed’s focus on inflation had disadvantaged workers. The years since the 2007-2009 financial crisis had convinced many that this was the case.

In November 2018, Powell launched a policy review that culminated in August 2020 with the adoption of an approach that allows economic expansions to last longer and “warmer,” with temporarily higher inflation rates. Ideally, this would lead to job gains that spread widely across society and reduce unemployment gaps between different demographic groups.

This was an approach consistent with what then seemed to be the changing nature of the U.S. economy, with low inflation and low interest rates, and also suited to the demands of a pandemic crisis that threatened a permanent hole in the market. American labor market. .

A little over a year after the start of this new approach, however, inflation is reaching levels not seen in decades as the resurgent demand for goods and services outstrips the supply of materials and labor. works in an economy that still shakes the rust of pandemic shutdowns.

“The new management team faces very difficult calls in the coming period,” wrote Krishna Guha, vice president of Evercore ISI.

Reporting by Howard Schneider and Jeff Mason; Editing by Dan Burns, Heather Timmons and Andrea Ricci

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