Powell has overseen the adoption of a new framework for monetary policy, incorporating a more inclusive assessment of the labor market and a pledge to allow inflation to overshoot a 2% target to make up for prior underperformance. He’s also pledged a gradual trajectory for the withdrawal of monetary stimulus as the U.S. economy recovers from the pandemic—moves that have been applauded by many Democrats.
“If President Biden was asking me—which he isn’t—I would advise to keep Jay Powell in place,” Alan Blinder, a former Fed vice chair appointed by President Bill Clinton, said Wednesday on Bloomberg TV. “Not so much as a reward for good behavior, although you could say that he deserves a reward, but just for the stability that it represents.”
Financial markets early this year reflected rising concerns about an inflation surge as the Fed held off from signaling any tightening. More recently, Treasury yields have slumped as some economic data undershot forecasts.
Democratic Senator Sherrod Brown of Ohio, who chairs the Banking Committee, said in a recent interview that Powell has rankled Republicans with his own tilt toward the issues of inequality and climate. “Don’t talk about justice, don’t talk about poverty, don’t talk about climate. Don’t talk about things that affect Americans,” Brown said in summarizing his take on GOP views.
Brown, while refraining from saying if he supports or opposes a second term as chair for Powell, said his disagreements with Powell have been mostly about Quarles, whose tenure as vice chair for supervision ends in October 2021, and about “how the Fed has been too weak on regulation and making sure banks behave in a public, reasonable way,” including on decisions like stock buybacks.
Quarles has left open the possibility of remaining a governor even if he is no longer vice chair, given that his board membership slot doesn’t expire until 2032.
Senator Elizabeth Warren, a Massachusetts Democrat, told Quarles in May that the U.S. financial system “will be safer when you are gone.”
Clarida’s term as a Fed governor expires in January 2022. He has not publicly discussed his future at the central bank.
Powell’s term as chair expires in February 2022.
Biden met with Powell for the first time since becoming president last month, when the president hosted the nation’s top financial regulators in the Oval Office.
On climate change, Powell has pushed back against any idea that the issue should be a centerpiece of monetary policy, saying it is mainly a question for government and elected representatives. But he has noted that it has implications for the financial institutions the Fed oversees, and he did bring the Fed into a club of central banks that discusses climate change.
As for the current vacancy on the Fed board, many White House officials have agreed that economists Lisa Cook and William Spriggs, both Black, are good candidates, the people said.