Jerome Powell Confirmed for a Second Term as Fed Chairman

Jerome Powell Confirmed for a Second Term as Fed Chairman

Jerome H. Powell, chairman of the Federal Reserve, said in an interview Thursday that bringing down inflation is likely to be painful, but allowing price gains to persist would be the biggest problem: meeting the big challenge facing his central bank. , since he officially begins his second term at the helm of it.

Mr. Powell, whom senators confirmed for a second four-year term as head of the central bank in an 80-19 vote on Thursday, occupies one of the most important positions in the United States and in the world economy at a time rapidly inflating. and deep uncertainty.

Consumer prices rose 8.3 percent in April from a year earlier, according to data reported on Wednesday. And while inflation eased slightly on an annual basis, it remained near the fastest pace in 40 years, and details in the statement suggested price pressures remain intense.

The Fed has already started raising interest rates to try to cool the economy, notching its biggest increase since 2000 when it raised borrowing costs by half a percentage point this month. Mr. Powell and his colleagues have signaled that they will continue to raise rates as they try to restrain spending and hiring, hoping to balance supply and demand and reduce inflation.

Powell suggested Thursday in an interview with Marketplace that an even bigger interest rate hike of 0.75 percentage point, while not being considered at the moment, might be appropriate if economic data is worse than officials expect. .

“The process of bringing inflation down to 2 percent will also include some pain, but ultimately the most pain would be if we didn’t address it and inflation took root in the economy at high levels,” Powell said. He also said. “It’s just people losing the value of their paycheck due to high inflation, and ultimately we would have to go through a much deeper recession.”

Mr. Powell, who was elected Fed governor by former President Barack Obama and later elevated to the presidency by former President Donald J. Trump, was re-elected by President Biden late last year.

Although he has been popular with lawmakers for much of his term, several Republicans and Democrats voted against the nomination. Sen. Robert Menendez, a Democrat from New Jersey, cited the central bank’s proposal lack of promotion Latino leaders. Senator Richard Shelby, Republican of Alabama, quoted high inflation in opposing Mr. Powell, posting on Twitter that “we shouldn’t reward failure.”

Inflation is likely to be the defining challenge of Powell’s second term. As Shelby’s comments suggest, the Fed has been criticized for responding too slowly to rapid price gains last year. Mr. Powell has emphasized that policymakers did the best they could with the available data.

“If you had perfect hindsight, you would come back and it probably would have been better for us to have raised rates a little bit sooner,” Powell said in his interview with Marketplace. “I’m not sure how much of a difference it would have made, but we have to make decisions in real time, based on what we know at the time, and we did the best we could.”

With Powell’s confirmation, Biden has now appointed four of the seven Fed governors in Washington, giving the central bank his go-ahead at a crucial time.

Last month, the Senate confirmed former Fed Governor Lael Brainard as Biden’s choice for Fed Vice President, an influential position within the central bank.

This week, the Senate confirmed two more new Fed governors: Lisa D. Cook and Philip N. Jefferson. Mr. Biden also nominated Michael S. Barr as the new vice president of supervision, and his confirmation hearing before the Senate Banking Committee is scheduled for next week.

Ms. Brainard and Mr. Powell have long been aligned on policy, and the Fed’s newest governors, Ms. Cook and Mr. Jefferson, indicated during their confirmation hearings that they, too, are focused on fight inflation. Fed officials see stable prices as a critical component for sustainable economic growth.

“High inflation is a serious threat to a prolonged and sustained expansion, which we know raises the standard of living for all Americans and leads to broad-based shared prosperity,” Ms. Cook said during her confirmation hearing. “That is why I am committed to keeping inflation expectations well anchored.”

In addition to the new faces on the seven-person Board of Governors in Washington, several of the Fed’s 12 regional reserve banks are also undergoing personnel changes. Susan M. Collins has been selected as president of the Federal Reserve Bank of Boston, and just this week it was announced that Lorie K. Logan would lead the Federal Reserve Bank of Dallas. Both will start this summer.

The heads of the Fed’s Kansas City and Chicago banks are due to retire soon, paving the way for new leadership changes.

The seven Fed governors and the New York Fed president hold permanent seats on the Fed panel that votes on monetary policy, while the other regional presidents rotate among the other four seats.

The new central bankers will take office at a difficult time, because while the economy is strong now, the Fed’s policies will likely have to weaken it and hurt the labor market to cool inflation. The labor market now has many more vacancies than workers looking for work, and wages are rising rapidly.

“That’s not a healthy situation for an economy because it leads to high inflation,” Powell said in the interview Thursday. “That’s an important part of the inflation story.”

The looming question for the Fed is whether officials will be able to slow the economy enough to temper inflation without triggering a recession, something Powell and his colleagues have repeatedly acknowledged is likely to be a challenge.

“There are big events, geopolitical events around the world, that are going to play a huge role in the economy over the next year or so,” Powell said. “So the question of whether or not we can execute a soft landing may actually depend on factors that we don’t control.”

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