Fed-Watchers Emphasize Policy Continuity in Biden’s Picks

(Bloomberg) -- President Joe Biden selected Jerome Powell for a second term as Federal Reserve chair, and elevated Governor Lael Brainard to become vice chair of the U.S. central bank.

Biden plans to announce his nominations for vice chair of supervision along with additional picks for open seats on the Board of Governors beginning in early December, the White House said Monday.

Fed-watchers emphasized the continuity in monetary policy that the choices signify. Here’s what they had to say:

Neil Dutta, head of U.S. economics at Renaissance Macro in New York

“Jerome Powell has long been the most obvious choice given the political dynamics in the U.S. Senate. The space between Powell and Brainard on matters on monetary policy is not as large as has been made out to be.”

“I do not expect Powell to turn hawkish now that this announcement is out of the way. I think he is someone who means what he says when he says it. If there is a change in policy, it will be because the economic data has strengthened in such a way that it demands a policy change.”

Michael Pugliese, economist at Wells Fargo Securities in New York

“Keeping Chair Powell in his position certainly is a continuity point. And then, elevating Brainard to vice chair certainly elevates her role a little bit. But it’s not just Powell, it’s not just Powell and Brainard -- we’ll certainly see what happens with these other nominations as well.”

“At a high level, this is not a big game-changer in terms of monetary policy.”

“I think the important thing to remember is obviously chair Powell is already the chair, and governor Brainard goes to vice chair. In terms of fed inflection points, those are pretty steady.”

Diane Swonk, chief economist at Grant Thornton LLP in Chicago

“This provides a moment of certainty in a persistently uncertain world for the Federal Reserve.”

“Powell and Brainard are a powerful duo, who have shifted the Fed to focus more on inequality. Inflation foments inequality -- they get that. The heavy lifting is how to deal with inflation without also disproportionately hurting those who can afford it least.”

“There is a need to staff full Fed. Too many seats are or will be vacant and we need all hands on deck.”

Julia Coronado, president of MacroPolicy Perspectives LLC in New York

“I think this is a dream team as much as Bernanke and Yellen were a dream team.”

The choice combines “Powell’s strategic people skills with Congress and pragmatic flexible approach to monetary policy with Brainard’s depth and thought leadership on the big economic issues.”

Thomas Costerg, senior U.S. economist at Pictet Wealth Management in Geneva

“Powell is a pragmatic central banker, which could be a crucial asset if monetary policy needs to change due to sticky inflation.”

“The question now is, are there things Jay Powell did not say to markets as he was waiting for renomination? At the margin, Powell will be a bit more talkative about what he really thinks about current high inflation. We could have a bit more hawkish message now that the nomination is in the bag -- although the real opening will come once he is confirmed by the Senate.”

“The risk for U.S. monetary policy in 2022 is to the hawkish side as inflation could be sticky and the labor market is more structurally than cyclically impaired. The risk is especially that QE could be tapered faster than initially announced.”

Skanda Amarnath, executive director of Employ America

“Chair Powell and Governor Brainard have shown admirable leadership in pursuing a historically rapid employment recovery from this historic recession, in marked contrast to the jobless recoveries from previous recessions. Especially at a time when the recovery remains incomplete and the policy debate is getting increasingly turbulent, we hope and expect that both of them will prioritize a strong, broad, and inclusive employment recovery from this pandemic-induced recession.”

“We hope that the Biden administration fill the remaining vacancies on the Federal Reserve Board with nominees who are equally committed to prioritizing a broad and inclusive employment recovery.”

Bob Eisenbeis, vice chairman of Cumberland Advisors

“The appointments keep two qualified, experienced people in place while allowing other people to come in and gain familiarity with the issues.”

“Their challenge will be inflation, which now doesn’t look transitory -- that plus normalization of the balance sheet without causing a recession.”

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