White House taps Jerome Powell for second term as Fed chair

US President Joe Biden on Monday announced that he was nominating Jerome Powell for a second four-year term as Federal Reserve chair. 

The Federal Reserve post is one of the most senior economic roles in the world, with decisions that often have global consequences.

Biden called Powell "the right person to see us through," the pandemic recovery and fight off inflation. The president called on Powell to ensure that the Fed "be a leader among central banks globally in addressing climate-related financial risks."

Powell said he and his colleagues at the Fed "understand that our decisions matter for American families and communities." The banker was upbeat, saying the US "economy carries the promise of returning to maximum employment." He also pledged to "do everything I can to meet the responsibilities entrusted to the Fed by Congress."

What does the nomination mean?

The pick is an endorsement of Powell's stewardship of the US economy through the recession caused by the coronavirus pandemic.

The decision indicates that Biden is putting continuity ahead of the desires of his party's progressive wing, who had pushed for another candidate. There is, however, also a bipartisan tradition of nominating serving chairs of the Fed for a second term.

Biden had faced calls from some members of his Democrats to replace Powell — viewed as something of a centrist — with a more liberal candidate such as Fed Governor Lael Brainard. However, the White House announced that she would serve alongside Powell as vice chair.

If confirmed, as is thought likely, Powell would preside over the US central bank's efforts to guide the recovery from the pandemic. At the same time, the Fed will need to fight off inflation, which has spiked in recent months. 

"We can't just return to where we were before the pandemic," Biden said in a statement. "We need to build our economy back better."

"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," Biden said.

Progressive Democratic Senator Elizabeth Warren of Massachusetts on Monday announced she would support Brainard's nomination but would vote against a second term for Powell.

Praise for pandemic handling

Liberals have criticized Powell for weakening bank regulation and failing to do more through the Federal Reserve's supervision of banks to combat climate change.

The 68-year-old received praise from across the political divide for a speedy response to the coronavirus pandemic last year.

The bank slashed its benchmark rate to zero and rolled out new lending facilities. Those efforts, as well as trillions of dollars in federal stimulus spending, are credited with helping prevent a more severe, long-lasting downturn.

Powell has won plaudits for his focus on ensuring the benefits of economic growth reach the most marginalized Americans, keeping interest rates lower for longer than normal.

He first took control of the US central bank in 2018, after then President Donald Trump broke bipartisan tradition to replace serving chair Janet Yellen. However, the former investment banker subsequently suffered months of withering attacks from Trump for raising interest rates.

rc/rs (AP, AFP, Reuters)