The Federal Reserve is in a very delicate moment. With all eyes on when it will dare to withdraw stimulus and at what speed, the institution faces the end of the term of its president, Jerome Powell, next February. But the current central bank leader has garnered early support that may tip the balance in his favor.
As reported by Bloomberg , her predecessor in the job, Janet Yellen, has shown some White House advisers her support for a re-election of Powell. Yellen was president of the body between 2014 and 2018 and, more importantly, she is the current Secretary of the Treasury to the president of the United States , the one in charge of nominating a candidate to occupy the leadership of the Fed.
The Brooklyn native is a benchmark for the American left when it comes to economics. She was already part of Bill Clinton’s team of economic advisers between 1997 and 1999, and later linked her career to monetary policy, presiding over the San Francisco Fed between 2004 and 2010, being the vice president of the Federal Reserve between 2010 and 2014 as nominated by Obama, and leading it for the next four years – the first woman to hold the position – until her term ended in 2018 and Trump decided to nominate Powell to replace her.
Therefore, Yellen’s word has an important specific weight as far as monetary policy is concerned, and it may be decisive for Biden to bet on continuity in the central bank.
The Oval Office tenant has yet to make public his decision on who will hold the reins for the next four years at the Fed, although he is expected to do so in the next two to three weeks. His team is reviewing the backgrounds of several candidates , especially regarding their views on the job market, sources familiar with the matter tell Bloomberg .
Powell’s strong point is, in turn, his weak point: he likes the moderate wings of both parties , he would be a consensus candidate. Considering that the candidate nominated by Biden will have to be ratified by the Senate, keeping a Republican may satisfy most of the elephant party, but the more left-wing branch of the Democrats is not up for re-election.
Instead, the most radical swath of Democrats prefer Lael Brainard , a Fed governor since 2014 and the only Democrat currently sitting on the Fed’s board of governors.
Biden could, however, concede and follow Yellen’s advice, keeping Powell, to give an image of bipartisan understanding . At the end of the day, other positions on the board of governors will be vacant soon – in addition to the one that already is currently -, which would allow the board to list to the left but leaving a Republican at the head of the institution.