Joe Biden therefore chose continuity and not rupture. The US president has renewed Jerome Powell as head of the US central bank (Fed), offering the number two position to Lael Brainard, who was pushed by the left wing of the Democrats, thus indicating a desire for consensus within his left. Powell, who has vowed to fight the surge in inflation, and Brainard have yet to be confirmed by the Senate.
The White House, in a statement Monday, hailed “the decisive action of President Powell and the Federal Reserve to cushion the impact of the pandemic and put the US economy back on track”, as well as the “key role “Played by” Lael Brainard – one of the main macroeconomists of our country “.
Fight against inflation
The Fed will act so that inflation does not “take root”, assured Jerome Powell. “We will use our tools both to support the economy and the strength of the labor market, and to prevent high inflation from taking hold,” he said during a speech at the White House, mentioning, among the other priorities of his next mandate, “the fight against the evolution of risks linked to climate change and cyber attacks”.
Joe Biden said he was “convinced that (Jerome) Powell and (Lael) Brainard’s emphasis on keeping inflation low, prices stable and full employment will make our economy stronger than ever.”
The appointment of the president of the Fed is, in terms of economy, one of the most important decisions of the mandate of the president of the United States. Long awaited, it had, for Joe Biden, taken on a political aspect more than an economic one. In the midst of negotiations for the adoption of his social and environmental reform plan, he wanted to spare the various sensitivities of his party, to ensure that these investments were adopted in the Senate.
A dove for the vice-presidency
Powell’s appointment now needs to be confirmed in the Senate, first by the Banking Committee and then in plenary, and he should have broad enough support. Its action, especially during the Covid-19 crisis, had in fact been widely welcomed on the right and on the left.
Lael Brainard, on the other hand, is less consensual. His positions in favor of strict banking and financial regulation, in particular, could have cost him his confirmation by the Senate, a failure that Joe Biden could not afford to risk. The American president also raised the risks related to climate change, a subject often raised by Lael Brainard, but on which the action of Jerome Powell had been sharply criticized by the left wing of the Democrats, who considered it too weak.
The Fed, which is the most powerful central bank in the world, decides the country’s monetary policy, and monitors and regulates the financial sector. Its decisions can boost or slow down American economic activity by fixing the cost of credit, influencing the dollar and thereby all financial markets.