President Biden will renominate Jerome H. Powell, the Federal Reserve chair, to another four-year term — ensuring policy continuity at a moment of rapid inflation and vast economic uncertainty but potentially angering progressive Democrats who had been agitating for a change in leadership.
The much-awaited decision was a return to tradition in which the central bank’s top official is reappointed regardless of partisan identity — a norm bucked by former President Donald J. Trump, who appointed Mr. Powell instead of renominating Janet L. Yellen.
It reflected a general view by Mr. Biden and his top aides that Mr. Powell has done well in supporting the economy through the pandemic recession and its halting recovery. It is also a bet that Mr. Powell is the right leader to steer the Fed through an economically and political treacherous storm of price increases, which administration officials are convinced will dissipate next year.
Mr. Biden will also nominate Lael Brainard, a governor whom many progressive groups had championed to replace Mr. Powell, to serve as the Fed’s vice chair. Renominating Mr. Powell — who won bipartisan support moments after the announcement — also spares the White House what might have been a bruising confirmation battle if the president had instead chosen Ms. Brainard, who has fewer Republican supporters in the Senate than Mr. Powell.
The stakes in the choice are unusually high.
Inflation has picked up sharply this year, with consumer prices increasing at the fastest pace in more than three decades in the year through October. The central bank is charged with keeping consumer prices stable while striving for maximum employment, and striking that balance could require difficult policy choices in the months ahead.
While taming inflation falls to the Fed, Mr. Biden has been suffering politically as prices rise for food, gas and airplane tickets. The president has repeatedly tried to reassure Americans that his economic policies will ultimately calm inflation, a message he is expected to repeat during remarks on Tuesday. His Fed decisions in recent weeks have become tangled in the politics of price increases, particularly as the president pushes Senate Democrats to coalesce around a $2.2 trillion climate change and social policy bill that Mr. Biden says will ease inflationary pressures in years to come but Republicans warn will stoke higher prices immediately.
Mr. Biden said he was certain that both Mr. Powell and Ms. Brainard would work to stabilize inflation and keep the economic recovery on track.
“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,” Mr. Biden said in a statement on Monday.
Mr. Powell’s reappointment suggests that the White House, which has a chance to fully reshape the Fed, is not aiming to completely overhaul the institution. The Biden administration already has one vacant governor role to fill, and two more seats will open early next year, giving Mr. Biden room to appoint at least three of seven governors. The president must also fill several leadership roles, including the Fed’s vice chair for supervision, a powerful position given its influence on bank oversight.
Mr. Biden has been under pressure from progressives and moderate Democrats to pick a diverse slate of leaders for the Fed who would prioritize tough bank regulation and do what they could to address climate change risks in the financial system.
Mr. Powell has come under criticism for being slow to address climate change and for backing measures that have chipped away at some post-crisis financial rules. In his statement on Monday, Mr. Biden said that he expected Mr. Powell, along with Ms. Brainard, to “address the economic risks posed by climate change and stay ahead of emerging risks in our financial system.”
Whether that will be enough to appease Mr. Powell’s critics remains to be seen. The Fed chair’s tenure has been criticized by some progressives, including Senator Elizabeth Warren of Massachusetts, who has called Mr. Powell “a dangerous man.” On Friday, Senator Sheldon Whitehouse of Rhode Island and Senator Jeff Merkley of Oregon released a statement opposing Mr. Powell’s reappointment.
In a statement on Monday, Mr. Whitehouse said that he was “disappointed” in Mr. Biden’s decision, saying that Mr. Powell had not taken climate change seriously enough.
“I sincerely hope that, if confirmed, Powell will reassess his past opposition to utilizing the Fed’s regulatory tools to minimize climate-related risks to the financial sector,” he said.
Other Democrats were more supportive, including Senator Sherrod Brown of Ohio, who praised Mr. Powell for helping steer the economy through the pandemic. Mr. Brown’s position is important given he chairs the Senate Banking Committee, which oversees the Fed and will handle the confirmation hearings for both Mr. Powell and Ms. Brainard.
Republicans, who supported Mr. Powell when he was nominated as chair by Mr. Trump, also lauded Mr. Biden’s decision to reappoint the chair.
Senator Patrick J. Toomey, Republican of Pennsylvania and the ranking member on the Senate Banking Committee, released a statement saying he would support Mr. Powell’s nomination, as did several other of his party’s senators.
Mr. Biden’s decision was influenced by a complicated economic moment. Inflation has jumped higher thanks to booming consumer demand, tangled supply lines and labor shortages that have helped to push the cost of used cars, couches and even food and rent higher. Yet millions of workers are missing from the labor market compared with before the pandemic. As a result, the Fed may be left balancing its two key goals as it charts its future policy path.
So far, the central bank has decided to slow its large bond-purchase program, a first step toward withdrawing monetary policy support that will leave it more nimble to raise interest rates next year if reigning in the economy becomes necessary.
The federal funds rate has been set to near-zero since March 2020, keeping many types of borrowing cheap and helping to fuel home and car purchases and other types of demand that in turn set the stage for strong hiring. Raising it could cool off growth and weaken inflation.
Yet trying to slow price gains would come at a cost. Workers are still trickling back after severe job losses at the onset of the pandemic, and the Fed is hoping to give the job market more space and time to heal. That’s especially true because continued waves of infection may be keeping many people from searching for work, either out of health concerns or because they lack child care.
Navigating the next steps will be no easy task.
Mr. Powell is a Republican who was first appointed by President Barack Obama as a Fed governor, then elevated to chair by Mr. Trump, whose decision to replace Ms. Yellen as Fed chair upended a longstanding tradition in which presidents reappoint Fed chairs of the opposite party who had done a good job.
Ahead of the White House’s decision, some economists had argued that it would be valuable to restart that pattern. Doing so, the logic went, would signal that the Fed is a technocratic body that sets prudent economic policy without taking into account political considerations.
Plus, Mr. Powell is often lauded for his track record as chair, which has seen the central bank pursuing full employment with vigor. The Fed guided the economy through the start of the coronavirus pandemic, unveiling a series of market rescue programs that kept Wall Street functioning and averted a financial disaster that could have cascaded through the economy.
But Mr. Powell had faced opposition from some progressive Democrats, first over his history of voting for changes that made financial regulation looser for banks, and later because of an ethics scandal that took place while he was overseeing the central bank. Two of the Fed’s 12 regional presidents made significant financial trades for their private accounts in 2020, when the Fed was actively rescuing many markets from pandemic fallout.
Mr. Powell has said that he defers to the person Congress has confirmed to the bank supervision role to set the agenda when it comes to regulatory matters. The Fed has unveiled new ethics rules since news of last year’s financial activity broke.
Presidential nominees to the Fed Board and Fed leadership positions must first pass through a Senate committee, then through a vote on the Senate floor.
President Biden said he would nominate Lael Brainard as the Federal Reserve’s vice chair, the No. 2 role at the Fed and one that could give her a stronger mandate to influence everything from the cost of money to the future of digital cash.
Ms. Brainard, who has been a Fed governor since 2014, is already part of the close inner circle of policy advisers of Jerome. H. Powell, the Fed chair. But her elevation to vice chair will make her Mr. Powell’s closest collaborator on monetary policy matters if she is confirmed by the Senate.
The vice chair holds little power officially, but in practice is regularly the person who floats new ideas in speeches and who helps to guide a Fed chair’s thinking on policy matters.
Ms. Brainard’s elevation comes at a pivotal economic moment. The Fed is wrestling with how to set policy at a time when inflation has shot higher but millions of jobs remain missing. Like Mr. Powell, Ms. Brainard has been wary of reacting to high prices too swiftly by lifting interest rates to choke off growth, worried that it could diminish job market opportunities. But both are carefully watching the price trajectory, with an eye on ensuring that high inflation does not become a long-lasting trend.
Ms. Brainard would be the third woman in the Fed’s 108-year history to hold the job, following in Janet L. Yellen and Alice Rivlin’s footsteps. Her new role would put her in a powerful position to weigh in on the path ahead for digital currency as the Fed contemplates whether it needs to issue one, something some other global central banks have done or are in the process of doing. Her more elevated position could also give her a bigger bully pulpit on climate-related issues.
She has been a major proponent of a more active Fed role in making sure the financial system is prepared for potential fallout from climate change. She gave a speech at the Fed’s first climate-focused conference in 2019 and has recently focused on the need for climate scenario analysis for banks, which would test how well they would hold up amid extreme weather events, sea level change and other climate-tied risks.
Ms. Brainard is a longtime Washington policymaker. She played a leading role in European debt crisis and Chinese currency deliberations during the Obama administration as a Treasury Department official, and she worked for the National Economic Council during the Clinton administration. She earned her economics doctorate at Harvard and was an up-and-coming professor at the Massachusetts Institute of Technology before moving to Washington to pursue a career in policy.
Ms. Brainard was initially viewed as a leading candidate for Biden administration Treasury secretary, though some progressive groups opposed her for the job. Many of those same people had pushed her as a candidate for Fed chair or another top leadership role, though — often based on her track record when it comes to financial regulation.
As the sole Democrat left at the Fed board in Washington after 2018, Ms. Brainard used her position to draw attention to efforts to chisel away at bank rules, a process that was being driven by Randal K. Quarles, the Fed’s vice chair for supervision who is stepping down in December. In the process, she created a rare public disagreement at the consensus-driven central bank, dissenting from policy changes more than 20 times in 2019 and 2020.
Ms. Brainard often released detailed explanations of her dissents, laying out a road map of what changes were made and why they might be problematic. For instance, when the Fed streamlined its stress-test approach, she supported simplification in spirit — but disagreed with how it was done.
“Today’s rule gives a green light for large banks to reduce their capital buffers materially, at a time when payouts have already exceeded earnings for several years on average,” she said, publishing an analysis of how she came to that conclusion, one that Mr. Quarles disagreed with.
Her new position will not give her more direct say over financial regulation than she previously had — governors all have a single vote on regulatory decisions — but she and her record of dissents could be a resource for the new person coming into the vice chair for supervision job.
Ms. Brainard’s international policy background will also mean that she can bring a global view to bear on monetary policy, a fact some commentators have been celebrating.
Lael Brainard, a Federal Reserve governor since 2014, was in the mix to potentially replace Jerome H. Powell as Fed chair, but President Biden’s decision to elevate her to the Fed’s No. 2 role will still place her in a powerful position at the central bank.
If confirmed as vice chair, Ms. Brainard would be the third woman in the Fed’s 108-year history to serve in the role after Janet L. Yellen and Alice Rivlin. Her term would begin in February 2022, after the departure of Richard Clarida, the current vice chair.
Ms. Brainard may not be a household name, but she has been a player in Washington political circles for years, including serving in a top role at the Treasury Department during the Obama administration.
Here’s a look at who Ms. Brainard is and why Mr. Biden chose her for a top spot at the Fed.
Who is Lael Brainard?
Ms. Brainard, a Democrat, started her career in policymaking in the 1990s. During the Obama administration, Ms. Brainard served as the Treasury’s under secretary for international affairs, earning a reputation as a perfectionist. At the department, she tried to put pressure on China to allow market forces to guide its currency and worked to persuade Europe to pursue a more ambitious economic rescue during its debt crisis.
Ms. Brainard also served as deputy national economic adviser to former President Bill Clinton. From 1990 to 1996, Ms. Brainard was an assistant and associate professor of applied economics at the Massachusetts Institute of Technology.
The daughter of a Foreign Service officer during the Cold War, Ms. Brainard was raised in Communist Poland and Germany before reunification. She went on to receive an economics doctorate at Harvard University.
Mr. Powell, who Mr. Biden nominated for a second term as Fed chair on Monday, has frequently praised Ms. Brainard’s intellect in private conversations and has installed her in key roles at the Fed, including tapping her to play a major part in devising and overseeing the Fed’s emergency lending programs.
In January, Ms. Brainard was viewed as a leading contender to be Mr. Biden’s Treasury secretary, a position that went to Ms. Yellen.
What does the vice chair do?
The vice chair, the No. 2 role at the Fed, holds little power officially, but the vice chair typically floats new ideas in speeches and helps advise a Fed chair’s thinking on policy issues.
Although Ms. Brainard is already part of Mr. Powell’s inner circle of advisers, her new role would make her Mr. Powell’s closest collaborator on monetary policy issues.
What are her views on monetary policy?
Both Mr. Powell and Ms. Brainard have been cautious of reacting to inflation too quickly by raising interest rates. But they have said they are carefully watching the price changes to ensure that high inflation does not become long-lasting.
She has also been supportive of the Fed’s approach to slowing its bond-buying program, which was put in place during the pandemic to help support markets and keep money flowing through the economy. Some Fed officials have pushed for a quicker “taper” given inflation, but Ms. Brainard has not suggested she wants to deviate from the course that the Fed outlined at its last policy meeting.
Will her new role change anything at the Fed?
Ms. Brainard has been outspoken on several issues, including the need for the Fed to take a more active role in climate-related issues to ensure that the financial system is prepared for potential fallout from climate change. She has also pushed back against recent moves by the Fed to loosen some post-financial crisis bank regulations, including voting against rule changes and issuing pointed dissents criticizing the Fed’s approach.
Her new role could put her in a stronger position to influence those topics.
In his statement announcing her nomination, Mr. Biden pointed to climate change and financial regulation as areas where he expected both Ms. Brainard and Mr. Powell to play a strong role, saying “they also share my deep belief that urgent action is needed to address the economic risks posed by climate change, and stay ahead of emerging risks in our financial system.”
Senator Elizabeth Warren, the Massachusetts Democrat, said on Monday that she would not vote to confirm Jerome H. Powell for a second term as chair of the Federal Reserve, citing “failures on regulation, climate and ethics.”
Ms. Warren, who has called Mr. Powell “a dangerous man,” had been pushing for President Biden to name Lael Brainard as the next chair of the central bank. Mr. Biden’s decision to name Ms. Brainard to the No. 2 spot at the Fed drew Ms. Warren’s support but she said she would continue to push for additional governors who support aggressive financial regulation.
“It’s no secret I oppose Chair Jerome Powell’s renomination, and I will vote against him,” Ms. Warren said in a statement.
Other powerful Democrats, along with Republican lawmakers expressed. support for Mr. Biden’s decision, saying it would keep the central bank on a steady course and protect its political independence at a time of inflation and economic uncertainty for the country.
Senator Sherrod Brown, Democrat of Ohio and the chair of the Senate Banking Committee, which oversees the Fed, praised Mr. Powell’s role in helping the labor market heal from the pandemic downturn and giving workers greater bargaining power in terms of higher wages.
“The Federal Reserve must continue to help steer our economic recovery in the right direction — toward full employment and an economy that empowers workers and their families,” Mr. Brown said. “I look forward to working with Powell to stand up to Wall Street and stand up for workers, so that they share in the prosperity they create.”
Senator Jon Tester, a Montana Democrat, said on Twitter that the decision “a smart move.”
Smart move by @POTUS to renominate Jerome Powell to lead the Fed.
Chairman Powell has been a nonpartisan steward of the economy through a major economic crisis. Our recovery is ongoing, and continuity at the Fed is critical as we keep working to lower costs for Americans.
— Senator Jon Tester (@SenatorTester) November 22, 2021
Mr. Biden’s decision to reappoint Mr. Powell, who was first appointed by former President Donald J. Trump, returns the country to a long tradition in which presidents of both parties have embraced the Fed chairs selected by their predecessors, in an expression of support for the central bank’s political independence. Mr. Trump bucked the tradition, replacing Janet L. Yellen with Mr. Powell in 2018.
Some progressive Democrats had urged Mr. Biden to also break with tradition and appoint someone else to the role. In addition to Ms. Warren, Senators Sheldon Whitehouse of Rhode Island and Jeff Merkley of Oregon had called for Mr. Powell to be replaced, citing his views on climate change, financial regulation and an ethics scandal at the central bank.
Mr. Whitehouse said in a statement on Monday that he was “disappointed” in the decision, adding that Mr. Powell had done too little to address climate change.
“Our Fed Chair must devote immediate and thorough attention to the climate threat before it is too late,” Mr. Whitehouse said in the statement. “I sincerely hope that, if confirmed, Powell will reassess his past opposition to utilizing the Fed’s regulatory tools to minimize climate-related risks to the financial sector.”
Americans for Financial Reform, a coalition of community, labor and civil rights groups, called the decision “a major disappointment to those of us who have fought for tougher regulation of Wall Street.”
Mr. Biden’s decision to nominate Ms. Brainard for vice chair could help mollify some of those concerns. Some progressive groups had been pushing for Ms. Brainard to lead the central bank, in part because of her views on climate change and financial regulation.
Mr. Whitehouse applauded Ms. Brainard’s nomination in his statement, saying “she clearly recognizes the gravity of the climate-related financial and economic risks facing our nation and will push the Fed to fully utilize its regulatory authorities in this space.”
Other groups that have been critical of the Fed expressed support for the picks, particularly Ms. Brainard.
The Fed Up Campaign, which advocates more accommodative monetary policies and full employment, said the Fed needed “to continue pro-employment, pro-wage growth, pro-racial justice macroeconomic policies for as long as economic conditions allow.”
“Governor Brainard is a strong choice for Vice Chair, and we are expecting Biden to continue to name truly bold and pro-worker choices to the vacant governor seats,” the group said.
Lawmakers also expressed support for the move, though some Republicans expressed concerns about Ms. Brainard, who has pushed for tougher financial regulations.
Senator Patrick J. Toomey of Pennsylvania, the ranking member on the Senate Banking Committee, said that he disagreed with some of Mr. Powell’s decisions during the crisis, but that he would support his nomination.
“When the pandemic hit in 2020, Chairman Powell acted swiftly and took extraordinary and necessary steps to help stabilize financial markets and the economy,” Mr. Toomey said in a statement.
The senator expressed “concerns about regulatory policies that Governor Brainard would support as Vice Chair,” but said looked forward to discussing those issues.
Both Mr. Powell and Ms. Brainard must win 60 votes in order to be confirmed by the Senate.
Stock prices rose on Monday on news that Jerome H. Powell will be renominated for another four-year term as chair of the Federal Reserve, reflecting investor relief that he would remain at the helm of the central bank, whose monetary policy has been a key driver of the market’s remarkable run over the past two years.
“The announcement of Powell’s renomination ensures continuity in the stance on policy,” wrote Ellen Zentner, the chief U.S. economist at Morgan Stanley, in a note to clients shortly after the announcement.
The S&P 500 climbed 0.9 percent in the first half-hour of trading on Monday, to what would be a new closing high. The benchmark index is up nearly 26 percent this year.
Mr. Powell’s renomination shifted expectations in the bond market, where investors’ movements showed slightly increased expectations for higher interest rates in the coming years.
Treasury bond prices declined, and yields — which move in the opposite direction — rose. Government bond yields, which essentially act as the foundation for interest rates charged on new car loans, mortgages, multibillion-dollar Wall Street bond offerings and more are heavily influenced by market expectations about what the Federal Reserve will do with monetary policy.
Yields on the two-year Treasury note, which had been hovering around 0.52 percent before the announcement, climbed to 0.56 percent. The yield on the five-year Treasury bill, which captures market expectations for how the Fed’s monetary policy will evolve over the next few years, a topic of considerable debate in the market, rose to 1.29 percent shortly after the announcement.
The rise in bond yields suggests that at least some investors were betting that Lael Brainard, a Fed governor whom Mr. Biden will promote to vice chair, could have been instead chosen to lead the central bank. Many progressive groups had championed her to replace Mr. Powell.
Steve Sosnick, the chief strategist at Interactive Brokers in Greenwich, Conn., said the rise in yields were an indication that some bond investors had thought Ms. Brainard, who is believed to be less aggressive about interest rate increases, had a chance to be Mr. Biden’s pick.