President Joe Biden has reappointed Federal Reserve Chairman Jerome Powell for a second term as the head of the central bank, a sign of the administration's approval of Powell's leadership during the COVID-induced economic crisis.
Questions had loomed over whether or not Biden would replace Powell. The Fed Governor Lael Brainard, a favorite among progressives for spearheading Fed work on climate-related risk, had also been considered by the administration and had been reportedly visited with the White House in the days leading up to the announcement. Biden has nominated Brainard as a Vice Chair of the Board of Governors of the Federal Reserve System.
A White House statement announcing Powell's nomination said America needs steady, independent, and effective leadership at the Federal Reserve to advance its dual goals of keeping inflation low and prices stable, as well as creating a labor market that benefits workers with better jobs and higher wages. President Biden has full confidence in Powell and Brainard's experience, judgment and integrity to continue to deliver on those mandates and to help build our economy back better for working families. Treasury Secretary Janet Yellen said Powell's renomination will allow the economy to continue to benefit from his stewardship. Senators on both sides of the aisle applauded the Biden administration for the picks, with Senate Banking Committee Chairman Sherrod Brown D-Ohio saying he look forward to working with Powell in a second term. The top Republican on the committee, Pat Toomey of Pennsylvania, said he will support Powell's confirmation.
Powell will now face the Senate Banking Committee for re-election before facing the full 100-member Senate for approval. Before the Biden administration made its pick, Sen. Elizabeth Warren D-Mass. She would not support a Powell renomination, citing bank rollbacks he had implemented under his chairmanship.
The opposition could come from the other side of the aisle, where GOP Senator Rick Scott of Florida said he would not support Powell if the Fed did not act faster to tamp down inflationary pressures.
Powell has securing bipartisan support through several administrations. Powell, a Republican by affiliation, was confirmed to the Fed Board as governor during the Obama administration, which secured a 74 to 21 vote in 2012. Powell won the election by 84 to 13 when Trump tapped Powell to replace Janet Yellen as the head of the Fed.
This time around, his confirmation hearing may be different.
Powell is in the midst of an unprecedented test for the central bank: determining whether high inflationary prints through the economic reopening will lead to runaway inflation. Americans are seeing rising prices at the store, raising questions as to whether or not the central bank's policies of near zero interest rates and bond buying are to blame.
The Fed said that the price pressures are due to factors such as limited semiconductor production and choked up shipping routes, which policymakers blame for COVID-induced restrictions on global production sites and ports.
The difficulties that high inflation poses for individuals and families, particularly those with limited means to absorb higher prices for essentials, such as food and transportation, are something we understand, Powell said at a press conference on November 3. Our tools aren't enough to deal with supply constraints. Powell could face scrutiny over an ethics scandal that has engulfed at least two senior officials. The heads of regional Fed outposts in Dallas and Boston made a number of personal financial transactions while voting on policy actions that moved markets.
Both of the Fed presidents, Eric Rosengren and Robert Kaplan, resigned from their positions. Powell moved to tighten the ethics rules of the Fed to ban all active trading, effectively allowing only holdings of diversified investment vehicles. The Fed chair has committed himself to repairing any reputational damage done to the central bank.
It happened, and we just have to deal with it forthrightly and transparently and step up to meet this moment. I am totally committed to doing that, Powell said on November 3.
Since Powell's term as the Fed chair ends in February, the Senate will have to move quickly to confirm him. There are three other vacancies on the Fed Board that the White House could fill, including a vice chair for supervision.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter at bcheungz.