Senate confirms Jerome Powell as second-term lead Federal Reserve

Mr. Powell’s appointment, approved by 80-19 bipartisan votes on Thursday, has been on track for months to gain the approval of both parties despite the unrest over inflation and inflation. Aggressive interest rate increases The central bank has urgently begun to ease price pressures.

President Biden said last fall He is Mr. Powell will reappoint, The choice of continuity as the extent of the central bank’s challenges in controlling inflation is very clear. The 69-year-old Mr. Powell was knocked out by the president

Donald Trump

Six years after President Barack Obama appointed his board of governors to lead the central bank in 2018.

Legislators on the Senate Banking Committee approved his confirmation in a 23-1 vote on March 16, with only Senate Elizabeth Warren (D., Mass.) Opposing it.

The current episode of high inflation has not significantly affected Mr. Powell’s position on Capitol Hill. But his interpretation of last year’s price hike was tentative and the decision to initially slowly withdraw the stimulus – especially after the Biden administration approved the $ 1.9 trillion spending bill – has drawn criticism from economists on both sides of the aisle.

“As part of restoring its credibility, the central bank should engage in statements after some sort of action to try to analyze why they erred in assessing inflation risk and tentatively assessing inflation in 2021,” said former Treasury Secretary Lawrence Summers. In an interview last week.

Federal Reserve Chairman Jerome Powell said the central bank had agreed to raise interest rates by half a percentage point in a bid to curb four decades of rising inflation. Photo: Vin McNamee / Getty Images

Mr. Powell Agreed at the March press conference In retrospect, it would be appropriate to withdraw the stimulus early, as long as there are supply disruptions in the epidemic economy, especially after the central bank collided with very strong demand last year.

“There was a very strong financial reaction. There was a very strong monetary policy reaction. The demand was really strong. No one can deny that,” Mr Powell said. Said at the March 21 economic conference. “But you can not drop that amount of demand on any of our models and create this kind of inflation without supply side restrictions.”

Since the end of last year, Mr. Powell moved the central bank to quickly remove the stimulus. The central bank has raised interest rates twice this year, most recently by half a percentage point last week – the first such increase since 2000 – from 0.75% to 1%. Until the central bank is confident that inflation will set in slowly, Mr.

Such a policy path is more likely for officials to raise rates adequately To cause a recession. This is in stark contrast to the very optimistic scenario drawn up in the authorities’ March policy forecasts, known as the soft landing, in which inflation is declining, but unemployment is low and the economy continues to grow.

War in Ukraine As wars are often characterized by inflation and inflation, it has complicated the central bank’s ability to make a smooth landing Western permission for Russia Rising commodity prices and the global supply chain threaten to worsen the crisis.

Consumer prices rose 6.6% in March, as measured by the central bank’s preferred business sector personal-consumption spending index. On Wednesday, the Labor Department’s individual consumer price index, U.S. inflation fell to an annual rate of 8.3% in April, but the fastest in four decades.

Loyal Brinard won the Senate confirmation to become vice president of the Central Bank.


Photo:

Rod Lamky / Zuma Press

Meanwhile, the unemployment rate in April Was 3.6%Nearly half a century.

“Every time inflation is above 4% and unemployment is below 4%, history has shown that we have experienced a recession over the next two years,” he said. Summers said. “The fact that we have a smooth landing is definitely paradoxical.”

One concern is that the rise in prices will intensify enough or it will take a long time to change the inflationary psychology of consumers and businesses, self-fulfilling those expectations. If workers expect a strong inflation rate in a year, they can now seek higher wages.

“We cannot allow the wage-price spiral to continue, and we cannot allow inflation expectations to remain unbalanced. This is something we cannot allow. ” Powell said last week.

Last fall, some progressive Democrats called Mr. Mr. Pitana. Powell was greatly persuaded to bring in someone who would adhere to his easy-money post-epidemic incentive policies instead.

White House advisers Mr. Powell was seen as someone who could easily get Senate confirmation. The epidemic and the earlier break added even more pride to him for giving him a steady hand, in which he diverted Mr Trump’s attacks, which he wanted more central incentives before the epidemic.

Mr. Powell’s appointment coincided with the promotion of Central Bank Governor Lyle Brynard to vice president. Senate He confirmed her to that position On April 26th.

Lisa Cook will serve on the Central Bank board.


Photo:

KEN CEDENO / REUTERS

Mr. Biden was able to further imprint his stamp on the central bank Confirmation Earlier this week The other two economists Lisa Cook of Michigan State University and Philip Jefferson of Davidson College to fill vacancies on the central bank’s Washington-based board of governors.

Mr. With Powell’s confirmation, Mr. Biden will name four of the six central bank governors for their current positions. Some analysts have speculated that the new candidates may be in favor of a lower aggression rate increase, but as long as inflation is above the central bank’s target of 2%, they are unlikely to stop the central bank from tightening its grip at a faster pace.

Mrs. Cook and Mr. Jefferson Their Senate confirmation hearing said Overcoming high inflation should be the priority of the central bank, and central bank governors have traditionally been unanimous.

The president also hired Michael Barr, a law professor at the University of Michigan. Vice-Chairman of the Central Bank for Bank Supervision Fill in the final vacancy in the group of seven. His confirmation hearing was adjourned to May 19.

Mr. Powell’s first four-year term as president ended in early February. Since then he has been acting as “Add Pro Tempo”. In February, the confirmation process for federal appointments stalled, Democrats said. Biden refused to move the election separately and Republicans refused to vote in her initial election to Sarah Bloom Ruskin, vice president of bank oversight. Withdrew from review In March.

Mr. The political support that Powell nurtured was valuable throughout his first term. When Mr Trump threatened to fire the central bank chairman for not providing easy monetary policy, he led a policy U-turn from raising rates in 2019 to lowering them. Mr. Powell personally made it clear that there were no circumstances leading to his death, under which he would voluntarily resign from his job.

Later, he planned one of the boldest economic policy responses to work with Congress and the U.S. Treasury after World War II. The central bank cut interest rates to zero, followed by trillions of dollars in government debt.

During a congressional hearing in early March, when the epidemic struck in March 2020, Mr. Sen. of Powell’s quick action. John Kennedy (R., La.) Praised. “The government shut down the private sector.” Markets are in panic. Everyone look at you and be quiet, ”he said. “You did.”

Write to Nick Timiras at [email protected]

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