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Federal Reserve Chairman Jerome Powell is poised to keep his title for another four years following President Joe Biden’s announcement that he would nominate Powell for a second term on Monday. Biden also announced a new nomination for vice chairwoman — current Fed Governor Lael Brainard — who faces a rockier path to confirmation.
If confirmed by the Senate, what would Biden’s Fed picks mean for Americans’ paychecks, mortgages and stock portfolios?
The two nominations come at a crucial time. Inflation is at the highest level in 31 years. Americans are paying more for just about everything from gasoline to groceries — which increased by 6.1% and 1.0% last month compared to September, respectively, and are up nearly 50% and 5.4% since last October.
In separate remarks delivered alongside Biden on Monday, Powell and Brainard said they’re committed to using the Fed’s tools to help lower inflation and alleviate the toll it has taken, especially on work-class Americans.
Many analysts and economists see Powell’s renomination as a positive for the stock market. “It provides continuity at a critical time,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, told MarketWatch.
Regardless of who Biden nominated, the Fed was inevitably due for some policy changes, said Greg McBride, chief financial analyst at Bankrate.com.
“The Fed that had been providing accommodation is slowly starting to withdraw it, and that portends heightened stock market volatility, more modest real estate returns, and higher borrowing costs,” McBride told MarketWatch.
Even though Powell has been criticized by predominantly Republican lawmakers for not doing enough to curb inflation, it’s likely that “a Powell-led Fed will not be willing to tolerate the persistent inflation overshoot we expect,” said Kevin Cummins, chief U.S. economist at NatWest Markets.
Powell’s renomination also likely means that the Fed will continue to distance itself from regulating digital currencies like bitcoin
BTCUSD,
which the central banker has said that he would not move to restrict.
Brainard, however, could push the Fed to “take a tougher stance on regulatory matters,” said McBride, adding that “what form that takes remains to be seen.”
While Powell is considered a moderate Republican, Brainard, who could serve as his second-in-command, is the only registered Democrat on the Board of Governors at the Fed.
She has been a strong proponent of increasing regulatory oversight on banks to monitor the risks they take on and prevent potential fallouts that could impact the overall economy.
