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Monday, November 29, 2021

Vital Signs: Cautious on rates, strong on climate action – meet Lyle Brainard, Biden’s new pick at the US Federal Reserve

In addition to a Supreme Court justice, perhaps the most important appointment is the US President presiding over the Federal Reserve. And unlike federal judges, the chairman of the Fed is appointed (or reappointed) every four years.

Joe Biden has faced the same conundrum as the parade of predecessors – whether to reappoint the chair initially appointed by the other side of politics.

His choice this week came down to re-appointing Republican Donald Trump-appointed Chairman Jerome Powell and appointed by Barack Obama to the Fed, or to hire another Fed governor, Lyle Brainard, a former top official in the Clinton and Obama administrations. .

Trump-appointed Vice President Richard Clarida’s term was also nearing an end, and he was embroiled in a sort of insider trading scandal.

On Monday, Biden decided to reappoint Powell as chairman and make Brainard vice president.

If confirmed by the Senate, Brainard would become the third woman to hold the position, after Alice Rivlin and Janet Yellen.

Brainard has impeccable credentials. He holds a PhD from the Harvard Department of Economics and has left a very promising career in academia to serve both President Clinton and President Obama.

As vice president, he will have a significant impact. The Fed chair is more like a ringmaster than a chief executive, making its vice president a key player.

So where does she stand on the bigger issues?

Dovish on rates, worried about climate

Just like Brainard Powell is quite polite on interest rates. This is another way of saying that he is in the “recent inflation is temporary” camp, and is therefore unlikely to risk raising interest rates early.

He is stricter than Powell on banking regulation. One of the major reasons President Trump appointed Powell to replace Obama-appointed Janet Yellen was Powell’s more relaxed approach to regulating Wall Street.

Powell hasn’t been completely soft on regulation, but he has steered things in that direction. Brainard’s stance is tough. In his seven years at the Fed, he has disagreed with more than 20 board votes that eased Wall Street rules.

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Read more: Jerome Powell keeps his job at the Fed, where he will be responsible for preventing inflation from spiraling out of control – without affecting the economy

But the big point of departure is climate change. Brainard is a prominent advocate of the Fed, which follows the lines of the Bank of England and, to a lesser extent, the Reserve Bank of Australia, plays a large role in its thinking on climate change.

His advocacy has sparked a furious backlash, with Republican senators telling Powell that the Fed did not have the authority to consider climate change risk in its regulation and analysis of banks.

No one less than Nobel laureate Jean Tirole backed him this month, saying central banks were bad at considering climate change.

Powell appears less eager to take climate change into account, but if Brainard is confirmed by the Senate she will become a force to be reckoned with.

Meanwhile, on Wednesday the Reserve Bank of New Zealand raised interest rates across the Tasman for the second month in a row, raising its cash rate to 0.75%, up from Australia’s 0.10% and the US Federal Fund’s 0.25% rate due to rising inflation. Amidst concerns about .

Rates raised in NZ, not yet in Australia or USA

Brainard is likely to be more cautious, taking the side of Nobel laureate Paul Krugman, who said this week that if the Fed raised rates and pushed the US into recession, it would be difficult to cut rates again to pull it out. It is possible.

This is something Australia’s Governor Philip Lowe is likely to consider after looking at the national accounts for Australia’s September quarter, due out next Wednesday.

They will show how far the economy has retreated during the depth of the mid-year lockdown, and provide clues as to the strength of the boom now that Australia’s two largest states are returning to work.

This article is republished from – The Conversation – Read the – original article.

World Nation News Deskhttps://www.worldnationnews.com
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