Nor was there an overwhelming reason to fire Powell, though the frightening surge in inflation offered a possible way out. Change-advocate Democrats wanted banking regulation, the environment and economic inequality to be treated tougher, but on monetary policy, a Fed chairman’s main focus, Powell and Brainard are narrowly spaced.
Perhaps the most important reason of all: the road to endorsement of Biden’s other finalist, Brainard, a loyal Democrat, looked at best thorny in the face of potentially strong opposition from the GOP and even some concern from the moderate Senate Democrats who favor Powell.
In the end, Biden did what many were close to him: it took him longer than expected to come to a sensible, moderate decision that delighted few but involved limited risk.
“The president made a strong statement on the importance of continuity and did not create additional uncertainty when there is already a lot of it,” said Jason Furman, Harvard professor and former top economic advisor to President Barack Obama who has close ties to the United States has Biden-White House. “He believes in institutions and likes the idea that there is at least one corner of Washington that is not incredibly politicized.”
Announcing his decision on Monday afternoon, flanked by Powell and Brainard, who voted Biden Powell’s No. 2, the president praised the current chairman for his work during the pandemic.
“We have made tremendous progress in this country. First and foremost, our economy creates jobs, lots of jobs, ”said Biden. He called the progress “evidence” of the Fed’s performance.
Still, he added warnings of inflation and noted – tellingly – that Powell had promised to prioritize climate change, one of the main criticisms some progressives had raised against the incumbent operator.
The President also pointed to the need for continuity and stability at the Fed at a highly sensitive economic moment. Powell acknowledged that rising prices for gas, housing and many other things are taking a “toll” on families.
That toll – including a 6.2 percent price hike in October alone – is among the biggest risks facing Democrats in the 2024 midterm and presidential election. And at least some senior Democrats close to the White House had hoped Biden would join the Fed moved on, blamed Powell for inflation and installed a more democratic chair like Brainard. That view is shared by some on Wall Street.
“I think it’s a big political mistake to rename Powell,” said Richard Bernstein, Wall Street analyst of Richard Bernstein Advisors. “Now Biden owns inflation.”
The argument that Biden might have scapegoated Powell over inflation has failed, in part, because most in the White House believe the President will be criticized by Republicans for higher prices, no matter who runs the central bank, and Brainard’s policies If everything had been more cautious about interest rates.
Progressives were split over the nomination, and some ran a campaign to try to convince Biden to drop Powell.
“It is insane that Biden is reappointing Powell, a man who does not share Biden’s vision on issues from financial regulation and the climate crisis to financial sector consolidation and cryptocurrency,” said Jeffrey Hauser, executive director of the Revolving Door Project. “Biden’s apparent hope that Powell’s reappointment will earn him bipartisan economic praise,” he said, “is as naive as believing that a bipartisan infrastructure vote would cement his polls.”
Others, like Rep. Pramila Jayapal (D-Wash.), The chairman of the Congressional Progressive Caucus, praised the Fed chairman. “Mr. Powell has shown an unprecedented commitment to full employment during his first full tenure as Fed chair,” she said in a statement.
By electing Powell, the White House will avoid another battle with Congress and will instead be able to focus on the rest of Biden’s nearly $ 2 trillion Social spending plan, which government officials believe will invigorate the left, increase productivity and lower inflation. Biden was unwilling to spend political capital to confirm Brainard for the presidency.
Powell and Brainard hardly differ on important monetary policy issues. Both are in favor of keeping interest rates low to stimulate attitudes and economic activity, even if inflation continues to rise for a few months as the economy tries to recover from the Covid-19 pandemic. All of Brainard’s dissenting votes against Powell at the Fed concerned banking regulation.
The Republicans, meanwhile, plan to definitely hammer out the president and his party for high prices.
“The Fed has an emergency policy long after the emergency is over, and that’s their biggest problem,” said Larry Kudlow, director of Trump’s National Economic Council and now host to Fox Business. “We’re moving from pandemic inflation to monetary policy inflation, and I think the Fed is way behind the curve. You risk 1970s-style inflation and the need for several rate hikes over the next year. “
A senior White House official blamed the long delay in the Fed’s decision on competing issues. “We did a lot. Many priorities, ”said the officer, who refused to be named because he was not allowed to speak on the file.
The official added that, in Biden’s view, Powell’s performance on the job justified another term.
“We got through this historic crisis without a financial crisis and with the Federal Reserve playing its role in helping the economy get on this path to full employment as soon as possible,” the official said.
Victoria Guida contributed to this story.