Powell was named Brainard as the Fed’s 1-2 punch. What’s next? By Reuters

NEW YORK (Reuters) – President Joe Biden has put an end to speculation over the months he has chosen to run the Federal Reserve by appointing Jerome Powell as president and Fed Governor Lael Brainard to promote the bank’s 2nd position.

The announcement launches an approval process in the U.S. Senate that will be extended next month or early 2022. Powell’s current presidency ends in early February, and he is currently held by Fed Chairman Richard Clarida. Brainard, who has been named vice president, will retire at the end of January.

Meanwhile, the Fed continues with its business, with the last policy meeting of the year in three weeks. Here’s what’s in the leadership process and the Fed’s agenda:

FIRST STOP: SENATE BANK COMMITTEE

The appointments of Powell and Brainard, who are members of the Fed board for 2012 and 2014, respectively, must be formally submitted to the Senate, and will be submitted to Senate Senate Committee, headed by Democrat Sherrod Brown.

The committee, divided equally between Democrats and Republicans, will hold ratification hearings and then vote on whether to report the candidates for, against, or without a recommendation to the entire Senate.

Fed officials including Powell and Brainard are entering a “sham period” before the policy meeting from the end of next week to December 14-15, before which it is impossible to hold a confirmation hearing or committee vote.

FULL SENATE

Despite the commission’s recommendation, the full 100-member chamber, also divided equally, has the final say, with Vice President Kamala Harris nominated as a vote to break the tie.

Both have previously gone through this process for their current positions. Although not unanimously approved in the previous nominations, both were eventually accepted.

Powell, a Republican who has paid close attention to his dealings with Congress since he became president in 2018, is receiving support from a majority of both parties. Brainard, a Democrat, may find less bilateral support, but at least one Republican — Maine’s Susan Collins — said he would support both.

The BTIG broker-dealer said in a statement on Monday that he expects the process to move quickly in December, which will begin immediately after the next Fed meeting.

“Our underlying case is that it will clear the entire Senate this year,” BTIG analyst Isaac Boltansky said.

THREE MORE PLACES

Biden still has three vacancies on the seven-member Fed Board of Governors, including Randal Quarles, the recently elected vice president of oversight, who leaves the Fed at the end of the year.

These openings allow Biden to make a lasting mark on the central bank, and most analysts anticipate touching progressives and individuals from different backgrounds, especially for the bank’s supervisory role.

Progressives like Massachusetts Sen. Elizabeth Warren, saddened by Biden’s choice of Powell, have stepped up calls from a tougher Wall Street policeman in a supervising seat.

In a statement to the nomination of Powell and Brainard, Biden said in early December that he would announce his options for those roles. Each will perform the same process outlined above. Tariff Market responds to Powell remaining as Fed Chair, https://graphics.reuters.com/USA-FED/movanlrwbpa/chart.png

‘DIFFICULT DANCE’

As Powell and Brainard’s appointments make their way through Capitol Hill, the Fed’s business continues, with the last policy meeting of the year in three weeks and with growing hope for more decisive action to double the bank’s 2% annual inflation rate . – One year goal.

Earlier this month, officials took the first step towards a more normal policy in a state of emergency designed to alleviate the economy in pandemic emergencies in about a year and a half.

Several Fed officials argue that they need to speed up this end-of-game process to bring inflation up a bit, ending bond purchases faster and starting rate hikes earlier.

It’s not clear how far Powell and Brainard are leaning in that direction, but they both went out of their way to make sure they stayed with Biden on Monday as inflation is determined to hinder continued economic recovery and hurt American families.

Mark Zandik, chief economist at Moody’s (NYSE 🙂 Analytics, sees some difficult months for the Fed with almost high uncertainty about the pandemic – and the dangers of a recovery – from inflation.

“They need to raise rates fast enough and remove the foot from the accelerator fast enough so that there is no inflation that will make it difficult for the economy to return to something that is an elusive or comfortable asset market,” Zandi said. “It’s a very difficult dance to do.”