President Joe Biden announced Monday that he's nominating Jerome Powell for a second four-year term as Federal Reserve chair, endorsing Powell's stewardship of the economy through a brutal pandemic recession in which the Fed's ultra-low rate policies helped bolster confidence and revitalize the job market.
President Biden also said he would nominate Lael Brainard, the lone Democrat on the Fed's Board of Governors and the preferred alternative to Powell among many progressives, as vice chair, the No. 2 slot.
A separate position of vice chair for supervision, a bank regulatory post, remains vacant, along with two other slots on the Fed's board. Those positions will be filled in early December, the president said.
President Biden's decision, reached after extensive consideration, 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 first elevated to his post by President Donald Trump, President 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.
"If we want to continue to build on the economic success of this year, we need stability and independence at the Federal Reserve — and I have full confidence after their trial by fire over the last 20 months that Chair Powell and Dr. Brainard will provide the strong leadership our country needs," President Biden said in a statement.
In a second term, to begin in February, Powell would face a difficult and high-risk balancing act: Rising inflation is causing hardships for millions of families, clouding the economic recovery and undercutting the Fed's mandate to keep prices stable. But with the economy still 4 million-plus jobs shy of its pre-pandemic level, the Fed has yet to meet its other mandate of maximizing employment.
Next year, the Fed is widely expected to begin raising rates, at least once if not more. If the Fed moves too slowly to raise rates, inflation may accelerate further and force the central bank to take more draconian steps later to rein it in, potentially causing a recession. Yet if the Fed hikes rates too quickly, it could choke off hiring and the economic recovery.
Powell's re-nomination must be approved in a vote by the Senate Banking Committee and then confirmed by the full Senate, which is considered very likely.
If confirmed, Powell would remain one of the most powerful economic officials in the world. By either raising or lowering its benchmark 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 short-term 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 chair of the Senate Banking panel, Sherrod Brown, an Ohio Democrat, and the committee's senior Republican, Pat Toomey, both immediately endorsed Powell on Monday.
Additional reporting by The Associated Press.