The Federal Reserve needs stable and independent leadership to navigate a post-pandemic world and Jerome Powell would be the right apolitical candidate to continue heading the US central bank, President Joe Biden said.
"Now some will no doubt ask why I'm renominating Jay, when he was the choice of a Republican predecessor? Why I'm not picking a Democrat?" Biden said during a press conference on Monday. "Put directly at this moment of both enormous potential and enormous uncertainty for our economy, we need stability and independence. At the Federal Reserve, Jay has proven the independence that I value in the Fed chair."
The renomination of Powell, a Republican appointed by former president Donald Trump, comes after one of the most tumultuous periods ever for both, the Federal Reserve and the US economy emerging from the coronavirus pandemic and the recession triggered by the measures implemented to address it.
Powell's reappointment had been opposed by the far-left wing of Biden's Democratic party establishment that has criticized Powell for lax regulations at the US central bank.
Biden acknowledged the nurturing role played at the Federal Reserve by Powell and Lael Brainard, a governor at the central bank whom the US president elevated to the post of vice chair. Both will have to go through Senate hearings to confirm the president's decision.
Biden particularly spoke about Powell's determination to defy former president Trump's attempts to influence the Fed chair's job or politicize the central bank altogether.
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"In the last administration, he stood up to unprecedented political interference and, in doing so. successfully maintained the integrity and credibility of this institution," Biden said. "It's just one of the many reasons why Jay gets support from across the political spectrum."
Powell had repeatedly turned down Trump's suggestion to employ zero interest rates for the United States, even before the COVID-19 breakout, to boost growth. Since the pandemic began, however, the Fed has held rates at near zero, saying such support was required for the beleaguered economy.
Notwithstanding Biden's praise, Powell and the Federal Reserve have taken intense criticism over inflation running at its highest levels in over 30 years in the US economy, which has been caught up in supply chain bottlenecks in the aftermath of the COVID-19 crisis.
The US economy shrank by 3.5% for all of 2020 due to shutdowns and other pandemic measures. Growth this year has been spotty, with an annualized 3.5% expansion in the first quarter, 3.6% in the second and 2% in the third.
In March, the Federal Reserve announced it expected a 6.5% economic expansion for all of 2021 and has not changed its target despite the uneven growth in the past three quarters. The problem the central bank continues to face is inflation as wages and the prices of almost everything have soared from the lows of the pandemic.
Powell and the Federal Reserve have also been criticized because of an ethics scandal where several officials of the central bank were found to have engaged in trading stocks at a time when the institution was implementing policies aimed at boosting markets. Powell himself disclosed that he owned municipal bonds, which the Federal Reserve was also was buying, and he also bought and sold funds tied to the broad stock market indexes.
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