Federal Reserve Board Chairman Jerome Powell testifies before a Joint Economic Committee hearing on Capitol Hill in Washington, November 13, 2019. REUTERS/James Lawler Duggan
WASHINGTON, July 14 (Reuters Breakingviews) – Federal Reserve Chair Jerome Powell stuck to the usual messaging about getting Americans back to work in his semiannual congressional testimony. Yet the central bank’s wider script could be in for a shakeup. Even if Powell keeps his role, President Joe Biden has a chance to choose as many as three of the Fed’s seven board members in the coming months. New picks may take Powell’s subtly expansive view of the central bank’s job and run with it.
The key decision for Biden is whether to retain the current chief rate setter, whose term is up in February. At Wednesday’s hearing, several Republicans told Powell he deserved a second term, including top House Republican financial czar Patrick McHenry. If the Fed chair lost the job, it’s unlikely he would stick around until the end of his board term in 2028. Either way, Randal Quarles’ tenure as vice chair for supervision expires in October, Vice Chair Richard Clarida’s time is up in January, and there’s already a vacant seat on the board.
Renominating Powell makes sense. The Fed acted swiftly and at scale during the pandemic. His push to wait longer for broad-based jobs growth for women, Black communities and other disadvantaged groups before raising interest rates also aligns with Biden’s views. But some progressive groups like the Sierra Club have complained that Powell, a nominee of former President Donald Trump, hasn’t done enough to fight climate change and economic injustice.
Those aren’t statutory goals of the central bank – its dual mandate is to influence prices and employment – but the president faces pressure to fill other seats with candidates who are more vocal about inequality, workers’ rights, racism and gender bias. Inside the government, there’s Jared Bernstein, a member of the Council of Economic Advisers who has focused his research on low- and middle-income Americans. Atlanta Fed President Raphael Bostic, who told “Axios on HBO” that he’d be a more accessible boss if he became chair, has emphasized racial disparities in the economy.
Possible candidates outside the government include William Spriggs, chief economist at labor union AFL-CIO, and Michigan State University professor Lisa Cook, who would become the first Black woman on the board if she were chosen.
A range of views is surely healthy for the Fed. But whatever its governors decide are their goals, its main tools, namely setting interest rates and buying assets, are ill-suited for targeting specific groups. That’s why progressives shouldn’t get too excited: It’s worth remembering what the central bank has power over and what it doesn’t.
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– U.S. Federal Reserve Chair Jerome Powell is testifying in Congress on July 14 and 15 as part of the central bank’s semiannual monetary policy report. His four-year term as chair expires in February 2022.
– Meanwhile, Randal Quarles’ tenure as vice chair for supervision ends in October 2021, and Vice Chair Richard Clarida’s time in that position concludes in January 2022. There is also one current open seat on the seven-member Fed board.
Editing by Richard Beales, John Foley and Marjorie Backman
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