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01 Jun, Thursday
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Bull Trader USA

The Fed: Biden rejects ‘fresh blood’ for Fed, says Powell brings stability the central bank needs

President Joe Biden on Monday said his re-nomination of Jerome Powell to head the Federal Reserve would bring stability to the nation’s central bank as the U.S. continues to recover, rejecting calls that the institution needs “fresh blood.”

The White House early Monday announced that Biden would be re-nominating Powell and tapping Lael Brainard for the No. 2 role at the Fed. With the exception of some progressive lawmakers like Sen. Elizabeth Warren, a Massachusetts Democrat, the choice of Powell is being seen as winning approval on Capitol Hill.

Now read: After letting suspense build, Biden taps Powell for second term

“We expect this pair to win quick Senate confirmation, and we view this decision as a market positive, especially for banks
” said Ed Mills of Raymond James in a note.  

In an apparent answer to critics like Warren, Biden said “we need stability and independence at the Fed,” and added that fighting climate change will be one of Powell’s top priorities.

Speaking after Biden, Powell said he and his colleagues would use their tools “both to support the economy and a strong labor market, and to prevent higher inflation from becoming entrenched.”

Brainard addressed inflation as well, saying she will put working Americans at the center of her job and pledging a “durable recovery.”

The announcements come as Biden’s approval ratings are taking a blow from inflation, and the president’s decisions are poised to have far-reaching consequences for him as well as the economy.

Opinion: Powell and Biden are rolling the dice on inflation and growth

“Powell’s renomination is an endorsement by President Biden of the Fed’s pandemic response and post-pandemic escape plan,” said Jon Lieber of Eurasia Group in a note. “This means Biden now owns politically the policies of the Powell Fed and its consequences,” Lieber said.  

With midterm elections approaching next year, Republicans are attempting to use inflation as a cudgel over Biden. Sen. Rick Scott of Florida, who heads the GOP’s Senate-campaign arm, recently told the Wall Street Journal that continued inflation is a “gold mine” for his party.

Also read: Biden could reshape the Fed by filling three open seats. Here’s the top 5 contenders

U.S. stocks

were up sharply on Monday, as Wall Street digested the news of Biden’s Fed picks.

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