President Joe Biden selected Jerome Powell for a second four-year term as Federal Reserve chair while elevating Governor Lael Brainard to vice chair, keeping consistency at the U.S. central bank as the nation grapples with the fastest inflation in decades and the lingering effects of Covid-19.
The move, announced by the White House on Monday, rewards Powell for helping rescue the U.S. economy from the pandemic and tasks him with protecting that recovery from a surge in consumer prices.
A Republican, Powell faces what will likely be a smooth confirmation in the Senate, where he was backed for his first term as chair in an 84-13 vote and whose members he subsequently worked hard to woo.
Brainard would replace Richard Clarida in the vice chair slot and may face opposition from Senate Republicans for her confirmation. She was interviewed by Biden for the chair position and was seen as a strong contender for the separate job of vice chair for supervision, which remains vacant.
"Clearly the market is looking at the likelihood that the Fed will increase the rate of tapering and move up the timing of the first rate hike now that Powell" is re-nominated, Kathy Jones, chief fixed-income strategist at Charles Schwab & Co. said on Bloomberg Television after the news was released.
Investors expect the Fed to raise rates from near zero in June, according to pricing in interest-rate futures markets. U.S. equity futures extended gains and Treasuries stretched losses on the Fed news.
Biden plans to announce that nomination along with additional picks for open seats on the Board of Governors beginning in early December, the White House said.
Powell, 68, has enjoyed bipartisan support, including from Treasury Secretary Janet Yellen and other Democrats, although progressive Democrats such as Massachusetts Senator Elizabeth Warren lobbied Biden to choose someone more aligned with them on overseeing banks and battling climate change.
Powell also had to answer for an ethics scandal after trading revelations by some senior Fed officials.
Biden's choice of Powell will also likely win approval from investors by ensuring continuity at the central bank as it begins withdrawing ultra-easy monetary policy amid the challenges of persistent inflation.
