Keeping The US Federal Reserve Head Jerome Powell From Donald Trump Administration, This Is President Joe Biden's Reason

US Federal Reserve Head Jerome Powell. (Wikimedia Commons/Federal reserve)

JAKARTA - United States (US) President Joe Biden on Monday nominated Federal Reserve Chief Jerome Powell for a second four-year term, positioning the former investment banker to continue the most consequential monetary policy shake-up since the 1970s and finish guiding the economy out of the pandemic crisis.

Meanwhile, Lael Brainard, a Federal Reserve board member who is another top candidate for the job, will become vice chairman, the White House said.

The combination paired two monetary policy veterans and collaborators on the Fed's recent policy overhaul, which shifted the emphasis on jobs from the primary focus on inflation set about four decades ago. Their challenge is to keep US job growth going while also ensuring that recent strong inflation doesn't take root.

"We have moved from a closed economy to one that is leading the world in economic growth," President Biden said in remarks at the White House with the nominees.

Citing Powell's 'steady leadership' calming panicked markets, and his belief in maximum employment-supporting monetary policy, President Biden said, "I believe Jay is the right person to help us."

The United States is still facing the effects of the pandemic, including inflation, he said but the country has made 'major progress' including adding nearly 6 million jobs since he was sworn in, increasing wages, positive signs the Federal Reserve has seen.

"I respect Jay's independence," said President Biden, directly addressing his Democratic backers as he voted for Powell, a Republican.

"At a time of enormous potential and enormous uncertainty for our economy, we need stability and independence at the Federal Reserve."

However, both Powell and Brainard still need confirmation from the US Senate for their posts at the Fed, where Democrats lead a despite split majority.

In addition, President Biden is currently opening several other Fed positions, including vice chairman for oversight, which he could fill as soon as next month and which could be used to strengthen bank regulation, increase diversity, and make other changes that his supporters have urged for Feds.

But for the Fed's core monetary policy, managing inflation and setting interest rates as the economy reopens from the pandemic, President Biden chose to continue.

"They are veterans and mature civil servants and there is little difference between them" on monetary policy, said Adam Posen, president of the Peterson Institute for International Economics.

Together, Powell and Brainard were able to provide potential non-partisan credibility for a more realistic assessment of inflation risk facing the United States.

That reassessment could mean a rate hike is coming sooner rather than later if inflation, which both have pledged to fight, proves to be more persistent than expected.

"We know that high inflation hurts families," Powell said in brief remarks at the White House event where Biden announced his candidacy.

Brainard also pledged to support economic growth "that includes everyone," and a Fed that "serves all Americans in every community."

US stocks hit record highs after the news. Government bond yields also rose and the dollar strengthened.

Powell's reappointment has been encouraged by various investors and economists with conservative and liberal leanings, welcomed by members of Congress from both parties.

Jerome Powell was appointed head of the Fed during the Donald Trump administration in 2018. At that time, he was confirmed by a vote of 84 to 13 in the US Congress.

To note, the Fed's aggressive actions at the start of the coronavirus pandemic in early 2020 were praised for preventing a potential depression. Then, some praised his focus on work in the new policy framework launched more than a year ago, and others argued it would be too risky to oust the Fed chair during the sensitive transition from emergency action taken during the health crisis.