Inflation raises focus on Biden Fed pick

President Biden faces a major decision on if he should renominate Federal Reserve Chairman Jerome Powell for another term.

With inflation soaring and the administration working to bring the economy back from its coronavirus pandemic doldrums, Biden’s choice to lead the central bank could prove particularly consequential as Republicans go on the attack ahead of next year’s midterms.

Fed-watchers consider Powell likely to win another term after his current one is up in February thanks to his broad support among both parties, the bank’s successful response to the pandemic-driven market meltdown and his own overlap with Biden’s views on the job market. As a Republican chosen by both former Presidents Obama and Trump for Fed positions, Powell also occupies a rare bipartisan lane in a bitterly divided Congress.

But Biden is getting pushed from the left to replace Powell with a Democrat more closely aligned with his support for tighter financial regulation and a more aggressive response to climate change, two areas where Powell falls well short of liberals’ demands.

“The fact that it’s still so quiet indicates one of three things. Either that they’ve been extremely good at keeping things quiet, two, that they haven’t reached a decision and probably aren’t on a decision for a while, or three, they’re trying to gauge the politics of the decision. All those things can obviously delay any kind of movement on anything,” one Biden ally told The Hill.

Both Powell and Fed Governor Lael Brainard — the only Democrat on the Fed board and the favorite choice of progressives — were spotted at the White House last week, though the administration declined to say why. The meeting followed remarks from Biden in Scotland, when he told reporters regarding nominating a chairman, “We’ll be making those announcements fairly quickly.”

Biden has said little else about his priorities for the upcoming pick beyond a Wednesday statement emphasizing his commitment to the Fed’s independence “to monitor inflation, and take steps necessary to combat it.”

And the White House has been mum on the timing of Biden’s announcement.

“I don’t have a timeline. I know this is an important question” deputy press secretary Karine Jean-Pierre told reporters on Monday when asked if the president would make a decision in days, weeks or months.

“You know, I’m not going to, you know, go into what the president — how is he — he’s making his decision.  All I can say is that this is incredibly important to the president, and he’s taking this very seriously,” Jean-Pierre said when asked if the number of vacancies on the board factors into the decision whether to keep Powell.

The White House didn’t have any comment on Friday when asked for a timing update.

Biden allies have said they haven’t heard anything concrete on if Powell will be renominated, and that it’s not a top topic White House staffers are discussing with those outside the administration.

While the president’s silence has fueled even further speculation, most Fed analysts see Powell’s odds rising as time dwindles.

Biden’s push to cement his economic agenda, debates over government funding and defense legislation and the fiscal cliff looming at the start of December will all swallow up floor time and political capital in the narrowly divided Senate. And with annual inflation reaching a 30-year high of 6.2 percent in October, pressure is building for both the Fed as an institution and Biden’s potential nominee.

“The increasing salience of inflation makes it an even tougher confirmation, probably for both of them. But Powell has much more room to maneuver in the Senate than Brainard does,” said Sam Bell, founder of Employ America, a research nonprofit that promotes policies to maximize employment.

Bell said that both Powell and Brainard “are pretty emblematic of the shifts in the Fed” toward waiting for unemployment to sink as low as possible before hiking interest rates. The Fed had typically hiked interest rates when inflation appeared to be rising toward its annual target of 2 percent, most recently in 2018, but likely at the cost of a stronger labor market.

Simply renominating Powell, who won 82 votes for confirmation in 2017, would allow Biden to avert a messier battle over a replacement nominee while keeping a full-employment Fed chief in the seat. More than a dozen Republicans and some moderate Democrats have already backed Powell for another term, a crucial boost in the 50-50 Senate, while only Sen. Elizabeth Warren (D-Mass.) has announced her opposition.

Like Powell, Brainard may also be able to draw from decades of experience in Washington and deep support among liberal lawmakers. Her supporters also tout her extensive portfolio of international finance experience and, in contrast to Powell, consistent support for tougher bank rules and climate supervision.

Those assets could carry powerful weight with Biden, who has also stocked his administration with several groundbreaking progressive financial regulators. Brainard would be only the second woman to chair the Fed, following Treasury Secretary Janet Yellen, whom Biden tapped to be the first woman to hold that role.

“Acknowledging Powell’s strengths, I still think the big threat to his re-appointment is a smart, savvy woman, known to markets, expert at monetary policy AND regulation, climate risk, and financial tech. If this Administration prioritizes diversity, seems Brainard is a no-brainer,” tweeted Sheila Bair, a Republican who chaired the Federal Deposit Insurance Corp. and endorsed Warren’s 2020 presidential bid.

Brainard would likely win the support of most Democratic senators if confirmed, but it remains unclear if her views on climate could pass muster with Sen. Joe Manchin (W.Va.), one of the few Democratic defenders of the fossil fuel industry. Her deep ties with Democrats have also made her a bid for the top spot a nonstarter with many, if not all Republicans.

“Even if they were to nominate Brainard now, I’m not suggesting that she wouldn’t get confirmed. I just think it would be a dicier process and if you’re the White House, you would have had to take that into consideration,” Bell said.