Daily Column – 23rd November 2021

Prepare to see Jerome Powell in our daily columns for the next four years, as President Biden recently appointed him to run the Federal Reserve for another four years.

Lael Brainard, a Fed Governor who was also in the race to replace Powell, was also selected as vice chair of the Fed by the president.
By picking Fed veterans Powell and Brainard, Biden demonstrated that he isn’t interested in upsetting the established quo at a time when Americans are afraid about increasing inflation and the economy is still recovering from the pandemic.

The first four years of his tenure

Powell, a former private equity entrepreneur who was chosen by President Trump, has found life as the world’s most powerful economic leader taxing. Despite choosing Powell, Trump (when he had a Twitter account) regularly slammed him for raising interest rates during a period of economic expansion, claiming Powell lacked “guts, sense, and vision!”

Then, in spring 2020, came Covid, when Powell took unprecedented steps to support the economy and calm financial markets. His measures drew praise from both Democrats and Republicans for averting an economic disaster and establishing the framework for a quick recovery.

The following four years

It’s not going to get any easier. With inflation at its highest level in 31 years, the Fed is under increased pressure to reduce its pandemic-era stimulus and raise interest rates without triggering a recession.

Powell has several detractors, despite his popularity in DC. The progressive wing of the Democratic Party has chastised him for failing to consider climate change in monetary policy (Sen. Elizabeth Warren has said she will vote against Powell’s nomination), and the Fed’s reputation has been tarnished by a recent ethics scandal involving officials’ stock trades.

Finally, the Fed must consider whether to follow China’s lead and build a digital currency.

Big picture: With Powell’s reappointment, Biden continues a long-standing US pattern of presidents retaining Fed chairs nominated by their predecessors, which was only broken in 2018 when Trump replaced now-Treasury Secretary Janet Yellen with Powell.

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