Because Ms. Brainard’s views on inflation and interest rates have been similar to Mr. Powell’s this year, policy continuation appears likely, no matter which one is chosen.
Mr Biden met with each candidate individually for interviews on 4 November, and according to people familiar with the matter, he only joined the Oval Office for those meetings with another adviser, National Economic Council Director Brian Deez.
Each meeting was scheduled for an hour, although Ms Brainard ran a little more than the allotted time, one of the attendees said. Some people familiar with the matter said Ms. Brainard’s meeting went better than expected.
Members of Mr Biden’s economic team and several Democratic lawmakers have backed Mr Powell for a second term. But resistance from some progressive Democrats, who want someone else committed to tightening financial regulation and addressing climate change at the Fed, has complicated White House calculations for months.
Mr Biden’s senior advisers are focused on garnering Democratic support for his $1.85 trillion social-spend and climate package. He sees little reason to make a decision on the Fed leadership, noting that it could upset lawmakers, no matter who the president chooses, and all but Biden to support his spending plans amid unified Republican opposition. Democrats are required.
Mr. Powell, 68, is a Republican and former private-equity executive who was nominated to join the Fed board by then-President Obama in 2011 and was tapped to head the central bank by then-President Trump in 2017 Was.
Ms. Brainard, 59, is a Democrat and economist who joined the Fed in 2014 after working in the Obama Treasury Department and the Clinton White House on international economic issues.
Mr Biden said on 2 November that he would announce decisions on the Fed “quite quickly”. In addition to the chair position, Mr Biden has a vacancy to fill on the seven-member board of governors, with two more seats he can fill by January. Mr Powell is unlikely to remain on the Fed board if one succeeds him as chairman, and his departure could give Biden four seats to fill by February.
Mr Biden’s political fortunes may be tied to how the next Fed chair reacts to a period of high inflation that lasts longer than the central bank or the White House expected.
Fed officials must decide when to raise interest rates to rein in inflation. If they go too low or too late, they run the risk of letting inflation get worse in the long run. If they move too high or too quickly, they run the risk of causing an economic downturn.
Take a look at some of the most frequently asked questions about any policy differences between Mr. Powell and Ms. Brainard:
How will they differ on monetary policy?
The two seem to be closely related. Ms Brainard has argued at least as strongly as Mr Powell that inflationary pressures, which have been caused by disruptions related to the pandemic, are likely to ease. This summer, she was advocating for a longer wait for the Fed’s bond-buying stimulus program to kick off than some of her colleagues.
Ms. Brainard was instrumental in the revised policy framework unveiled by Mr. Powell in August 2020, which toppled the Fed’s traditional practice of raising rates to pre-empt inflation as labor market tightens. Gave.
Ms Brainard’s lawyers, including Nobel laureate Joseph Stiglitz, praise her at times for challenging traditional thinking in macroeconomics and the Fed. In October 2015, Ms. Brainard signaled discomfort with then-Fed Chair Janet Yellen’s push to raise interest rates to near zero by highlighting the risks of weak global growth and soft inflation, although she voted for a rate hike. .
Before and after the pandemic prompted the Fed to cut interest rates to near zero last year, he talked about a strategy that could provide additional incentives once the Treasury is ready to buy securities. Rates were kept close to zero in order to buy whatever was needed to reduce yields. low levels. The Fed did not take the approach.
However, on other occasions, Ms Brainard has signaled more caution than some colleagues against allowing the economy to overheat. For example, in the second half of 2018, the unemployment rate fell below 4% and the deficit widened due to increased federal spending and tax cuts under the Trump administration, with Ms. Brainard asking the Fed to raise interest rates for another year. There may be a need to increase or two for the economy to slow down. Instead, the Fed halted rate hikes in early 2019 due to year-end market turmoil and an unexpected drop in inflation.
How might they react differently in periods of high inflation?
It’s hard to tell because the current situation is so unusual. Mr. Powell urged his colleagues this month to reduce their asset purchases at a pace that, if maintained, would end the program by June. The Fed has said it does not want to raise interest rates until the program ends.
Mr. Powell accelerated the Fed’s plans to reduce purchases, as inflation proved more stubborn than anticipated. Over the summer, he said he expected increased inflation to subside on its own and highlighted the importance of maintaining easy money to fuel labor-market reforms. But recently, he has signaled less confidence that inflation will quickly return to the Fed’s 2% target or that the economy can return to pre-pandemic employment levels before the central bank raises rates.
Ms Brainard’s recent public statements and comments from economists backing her for the job suggest she is more concerned that the Fed will be too late to scale back its economic-stimulus efforts.
When the Fed was raising rates in September 2018, however, Ms Brainard said it would “not hesitate to accelerate the pace of growth” if underlying inflation rises suddenly and unexpectedly higher.
Does high inflation weaken the case for Mr. Powell’s reappointment?
Analysts say this is unlikely because this year Ms. Brainard has drawn a position in favor of an easier monetary policy. “Biden may be reluctant to nominate someone who is seen as more polite in the market than the way Republicans humiliate him,” former Fed Governor Lawrence Meyer said in a note to clients on Friday. Being attacked for today’s very high inflation.” ,
Are there other policy issues where Mr. Powell and Ms. Brainard have more substantive differences?
Regulation: The most obvious division has been over financial regulation. Since Mr Powell became chairman in 2018, he has disagreed on 23 board votes, often in opposition to the loosening of banking rules imposed after the 2008 financial crisis. Ms Brainard has also supported accommodating a new regulatory tool developed after the 2008 crisis called the countercyclical capital buffer and objected to the Fed’s decision not to activate the measure in 2019.
digital currency: Of the six current Fed governors, Ms. Brainard has spoken most enthusiastically about central banks’ adoption of the digital dollar, while cautioning about the risks of unregulated private digital money. As China moves to implement its own government-issued digital currency, “It is very hard for me to imagine that the US, given the dollar’s position in international payments, would not be on the table in a similar situation to that. kind of offer,” she said on September 27.
In public, Mr. Powell has been more hesitant. “I am legitimately unsure whether the benefits outweigh the costs or vice versa,” he told lawmakers on July 15.
Climate change: Under Mr. Powell, the Fed has established two committees this year designed to evaluate the risks the climate poses to the banking sector and the financial system as a whole. But given the American political divide over whether or not to address climate change, he has been vulnerable to a potential political setback.
Ms Brainard has detailed ways for the Fed to direct the biggest banks to manage climate-related risks as part of a broader effort to monitor potential threats to the financial system. “This is an area where America has been behind, and we need to catch up,” Ms Brainard said in October.
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