The President of the United States, Joe Biden, nominated Jerome Powell for a second term as President and proposed as Vice President Lael Brainard, current Member of the Board of Governors of the Federal Reserve (Fed).
In a conference, the president explained that “to continue building on the economic success of this year, the stability and independence of the Federal Reserve is needed.”
Powell’s renewal must be voted on in the United States Senate and it is expected that, as his initial appointment was made by former President Donald Trump of the Republican party, he will have sufficient support to be ratified.
Biden said his economic strategy for the United States is not to go back to where it was before the pandemic, but to rebuild the economy.
“I am very confident that President Powell and Lael Brainard will focus on keeping inflation down, prices stable, and achieving full employment, which will make America much stronger than ever,” he said.
Brainard will replace Richard Clarida, whose term ends in February next year, and with his rise to the Fed’s vice presidency, will become the second woman to serve in seven years. Before her, the current Secretary of the Treasury, Janet Yellen, held the position.
Treasury Secretary Janet Yellen expressed her confidence that the US economy will continue to benefit from the experience and expertise of President Powell and Governor Brainard.
“The consistent leadership of President Powell and the Fed ensures that the US economy will continue to recover from the unprecedented economic and health crises.”
Inflation, the challenge
Upon accepting the nomination, Fed Chairman Jerome Powell explained that he is clear that the imbalances that led to the reopening of the economy have led to “an explosion in inflation.”
“We know that high inflation affects families, especially those who are less able to afford the higher costs of basic products such as food, housing and transportation.”
In addition, he promised to use all the tools available to the Fed to support the economy, strengthen the labor market and prevent inflation from taking hold.
Continuity, positive
According to Rankia Latin America chief economist Humberto Calzada Díaz, given the positive reaction from the market, the nomination indicates that they are pleased that the dovish trend in monetary policy will continue.
In monetary language, dovish indicates an expansive position that provides stimulus to the economy.
“A positive reception is interpreted for the continuity of the policies, and the market likes stability. It is the long-term outlook for inflation, which we think is being underestimated ”.
The specialist considered that Powell’s performance in these two years of pandemic has led monetary policy to support employment and the financial sector, dismissing inflation.
He believes that the nomination of Governor Brainard provides a certain counterweight to the guidelines of the United States government that could give balance to the decisions of the Fed.
Powell’s first term ends on November 25, and that of Vice President Clarida, at the end of next January. It will be until the second scheduled monetary decision in 2022, when the Powell-Brainard duo will vote for the first time on a monetary decision.
Reference-www.eleconomista.com.mx