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Biden picks Jerome Powell for second term as Fed chair

US President Joe Biden has picked Jerome Powell to lead the Federal Reserve for a second four-year term.
In an announcement on Monday, Biden also promoted governor Lael Brainard to the role of vice chair, replacing Richard Clarida, whose term expires at the end of January.

Biden said: “As I’ve said before, we can’t just return to where we were before the pandemic, we need to build our economy back better, and 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.”

ING analyst James Knightley said Biden has ignored calls from progressives in his party to replace Powell.

“This was the generally expected outcome given the successful role Powell played in steering the economy through the pandemic and the consequent broad bipartisan for his re-nomination,” he said.

“This must have been an important consideration given the President’s frustration in getting legislation passed due to wafer-thin majorities in the House and Senate. Biden would not have wanted another battle of attrition that diverts him from achieving his policy agenda since this Fed role requires Congressional approval.”

Kathy Bostjancic, chief US financial economist at Oxford Economics, said the selections mean continuity for policy at a critical time for economy.

“This should be well received by the financial markets,” she said. “We believe that Biden paired the announcement of the more Democratic-leaning nominee Lael Brainard with the Republican-leaning Jerome Powell to allay objections from the progressive members of the Democratic party. We expect swift confirmation by the Senate of both the nominees.

“Brainard will replace the current Vice Chair Richard Clarida. Clarida’s term as Fed Governor ends January 31, 2022. Given that Clarida is not likely to be re-appointed since he was appointed by President Trump, this will leave Biden with three governor seats to fill on the FOMC. Additionally, Biden will select the next Vice Chair of Supervision. He is expected to tap someone who would restore tougher oversight of financial institutions.

“We look for the three governor selections to be on the dovish end of the spectrum. However, the annual voting rotation of the regional Fed Presidents will provide some offset. The rotation replaces three solidly dovish and one strongly hawkish voting members with two strongly hawkish and two solidly hawkish officials. As such, we do not envisage any large altering of the course of policy from Biden’s selections.”

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