President Biden’s picks to lead the Federal Reserve emphasized the need to keep a close watch on inflation, as Americans across the country continue to worry about the pace of rising prices.
On Monday morning, Biden announced that he would be renominating Federal Reserve Chairman Jerome Powell for a second term and promoting Lael Brainard from Fed governor to Fed vice chair. If confirmed by the Senate, Powell and Brainard will face the economic puzzle of high inflation and a slow labor market recovery.
Biden officially made the nominations on Monday afternoon, where the president reaffirmed his support of the Fed’s efforts through the pandemic and the recovery.
“I believe Jay is the right person to see us through and finish that effort, while also addressing the threat of inflation,” Biden said.
Both Powell and Brainard took time to recognize high inflation, which has quickly become a major issue for American voters. The Bureau of Labor Statistics reported earlier in the month that prices rose 6.2% on a year-over-year basis in October. A pace that fast has not been recorded on the Consumer Price Index since December 1990.
“We know that high inflation takes a toll on families, especially those less able to meet the higher costs of essentials like food, housing, and transportation,” Powell said alongside Biden. “We will use our tools both to support the economy and a strong labor market, and to prevent higher inflation from becoming entrenched.”
Brainard opened her remarks by committing to put working Americans at the center of her efforts.
“This means getting inflation down at a time when people are focused on their jobs and how far their paychecks will go,” Brainard said.
Juggling maximum employment
The Fed has a dual mandate of stable prices and maximum employment. To tamp down inflation, the Fed could tighten its easy money policies, which have stimulated the economy through the depths of the pandemic (via near-zero interest rates and trillions in asset purchases).
But despite the high prints on inflation, the Fed does not want to pump the brakes on easy financing conditions for the nation’s employers, who are still struggling to find workers. The labor market appears to be recovering slower than prices; 4.2 million people still remain out of jobs compared to pre-pandemic levels.
“How do they convince everyone out there that they are committed to price stability, committed to their 2% inflation goal but, at the same time, not scare them into thinking they will tighten too much too soon,” Dreyfus and Mellon Chief Economist Vincent Reinhart told Yahoo Finance. “That’s the tightrope.”
In his brief remarks, Powell insisted the economy still carries the “promise of a return to maximum employment.”
The full picture of a Fed led by Powell and Brainard is not yet complete, since there are still three potential vacancies that the Biden administration will be able to fill on the Federal Reserve’s Board of Governors.
Among the rumored names: Atlanta Fed President Raphael Bostic, former Fed Governor Sarah Bloom Raskin, AFL-CIO economist William Spriggs, acting Comptroller of the Currency Michael Hsu, Michigan State University professor Lisa Cook, and Council of Economic Advisers Chair Cecilia Rouse.
“Most of these potential nominees are likely to put a greater focus on ‘broad-based and inclusive’ maximum employment. However, we think none of these nominees will ignore the threat of more persistent excess inflation,” wrote Fed watchers at Evercore ISI in a note Monday afternoon.
The White House said the president will announce nominees for those remaining roles in early December.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.
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