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Wednesday, September 28, 2022

Powell’s choice: The bet is that the economy has room to grow and inflation disappears.

President Biden’s decision to reappoint Jerome H. Powell as head of the Federal Reserve reflects the president’s belief that, despite high inflation, America’s economy still has a long way to go to make significant gains among women, blacks and Hispanics, and low-paid workers. trying to achieve this. climb into the middle class.

During his White House speech, Mr. Biden made it clear that he believes Mr. Powell philosophically shares his vision that the central bank should keep interest rates low and continue to support the economy until maximum employment has been reached.

“It’s an economy in which companies must compete to attract workers, not workers competing with each other for jobs, where American workers receive steady wage increases after decades of stagnation, and the benefits of economic growth are widely shared across the entire nation. not just for those at the top, ”Biden said Monday.

The president’s decision is also based on his conviction that Mr. Powell and Lael Brainard, the Fed chairman who Mr. Biden named vice chairman on Monday, share his views on stabilizing inflation while being careful not to stifle the recovery before the labor market emerges. heals.

For the president, this is a game on several fronts. He’s betting that Mr. Powell will stick more to his views on the economy than Republicans in the Senate, who have been condemning inflation for months and demanding action from the Fed. Many of these Republicans were quick to support Mr. Powell on Monday, expressing the hope that he will quickly take action to fight inflation.

The president is also betting that his team is correct in their economic diagnosis, that the risk of inflation is disappearing and that marginalized groups of workers still need help to reap the full benefits of economic growth.

Biden and his aides view the recent spike in inflation, which spiked to its highest level in three decades last month, largely as a result of disruptions in global supply chains, rather than a function of monetary policy that calls for rapid increases. rates due to the Central Bank.

The decision to reappoint Mr. Powell and elevate Ms. Brainard is the result of a series of political and economic calculations. Chief among these was the choice of a chair with the desire and support of both parties to ensure full employment.

But administration officials say other considerations have also contributed to Mr Powell’s reappointment, such as the need to maintain the stability of the central bank in the midst of the economic disruption caused by the pandemic and the independence record that Mr Powell built in a four-year timeframe that included yourself wilting. criticism from former President Donald Trump for nominating him as chairman.

Mr. Powell also appears to have allayed, in the eyes of the president and his aides, Liberal Democratic fears that the Fed did not sufficiently regulate large banks and other financial institutions during his time. In conversations with Mr Biden prior to the decision, Mr Powell convinced the president that he would follow the example of the Fed’s vice president of oversight – an open position that Mr Biden has not yet taken – in defining central bank policy on financial rules.

Mr Biden is expected to announce his choice for the office early next month, and Democrats expect him to appoint someone to take a tough stance on banks, a key demand from Massachusetts Senator Elizabeth Warren, a progressive opposing the reappointment of Mr. Powell. and called it “dangerous.” Mr. Biden recently discussed his Fed choice with Ms. Warren, and he is in regular contact with Senator Sherrod Brown of Ohio, a Democrat who chairs the banking committee.

World Nation News Desk
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