The Senate has greenlighted Jerome Powell for another term as Federal Reserve chairman after President Joe Biden asked him to continue serving in the role.
Powell, a Republican who was first nominated by former President Donald Trump, has attracted bipartisan support, and Thursday’s vote was 80-19. He gained a second four-year term as the top central banker despite presiding over the highest inflation in four decades, and he now faces the urgent task of tightening monetary policy to ease price pressures.
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Powell, whose term ended in February, was renominated for the role last year. He has managed to garner support from Democrats because of his defense of the central bank's independence during the Trump years and for his strong support for the pursuit of full employment.
The Fed has been in the spotlight for allowing inflation to soar far above its 2% target and then scrambling to control it. Consumer prices increased 8.3% for the 12 months ending in April, a slight downward tick from the 8.5% that was felt in March but still near the highest level since the early 1980s.
Earlier this month, the central bank hiked its interest rate target by half a percentage point. The Fed usually raises rates by just a quarter of a percentage point, so the more aggressive move is equivalent to two normal rate hikes at once and indicates that the Fed is concerned about the growing prices.
Powell has also signaled that the Fed might try to conduct additional half-point hikes at its future meetings.
Some economists fear that because the central bank waited so long to tighten monetary policy, it now is likely to raise rates so quickly that it could send the economy plunging into a recession. Powell has said he sees a path to bringing down inflation without crashing the economy, although he has acknowledged that it will be a challenge.
“In principle, it seems as though by moderating demand, we could see [job] vacancies come down as a result … and I think put supply and demand at least closer together than they are, and that would give us a chance to get wages down and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially,” Powell said during a press conference this month.
“So there is a path to that. Now, I would say I think we have a good chance to have a soft, or a softish, landing or outcome, if you will,” he added.
Some economists and many Republicans contend that the central bank should have moved sooner to reverse its pandemic emergency measures.
Rep. Kevin Brady (R-TX), the ranking member on the House Ways and Means Committee, told the Washington Examiner around the time that Powell was renominated that the Fed “helped create” the inflation the country is dealing with now.
“I’ve been very disappointed in Chair Powell this year,” Brady said. “He and the Fed dismissed both the labor shortage and then the real dynamics surrounding inflation for far too long — they’re just finally catching up with it.”
Still, despite the Republican concerns, Powell’s nomination was discharged from the Senate Banking Committee with bipartisan support. The only vote against him was Sen. Elizabeth Warren (D-MA), who has referred to Powell as a “dangerous man” for his handling of the regulation of big banks.
Powell was among a tranche of Biden nominees to fill open positions at the central bank.
The Senate voted this week to confirm economist Lisa Cook to a seat on the Fed’s Board of Governors, although every Republican opposed her, with Vice President Kamala Harris serving as the tiebreaking vote. It also confirmed Davidson College economist Philip Jefferson for a seat on the board and Lael Brainard to serve as vice chairwoman.
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"The Federal Reserve plays a primary role in fighting inflation, and these well-qualified members of the board will bring the skill and knowledge needed at this critical time for our economy and families across the country," Biden said after Powell was confirmed on Thursday.
Sarah Bloom Raskin, Biden’s first nominee to serve as the Fed’s top banking regulator, dropped out of contention when it became clear she would not get enough votes to be approved. Biden later nominated Michael Barr, one of the designers of the 2010 Dodd-Frank Act that overhauled the financial regulatory system, for the Fed’s vice chairman for supervision role.