Jerome H. Powell, the Federal Reserve chair, was confirmed to a second four-year term at the head of the central bank on Thursday – keeping him in one of the most consequential jobs in the United States and world economy at a moment of rapid inflation and deep uncertainty.
Mr. Powell, who was first elected as a Fed governor by former President Barack Obama and then elevated to chair by former President Donald J. Trump, was renominated by President Biden late last year.
The Senate approved Mr. Powell by an 80-19 vote. Several Republicans and Democrats voted against the nomination. Senator Richard Shelby, Republican of Alabama, cited high inflation in opposing Mr. Powell, posting on Twitter that “we should not reward failure.” Senator Robert Menendez, Democrat from New Jersey, cited the central bank’s failure to promote Latino leaders.
With Mr. Powell’s confirmation, Mr. Biden has now appointed four of the Fed’s seven governors in Washington, putting his imprint on the central bank at a critical moment as it faces what is arguably one of its toughest challenges in decades: Tackling stubbornly high inflation.
Consumer prices climbed 8.3 percent in April from the prior year, lingering near the fastest pace of inflation in four decades. The Fed is in charge of fostering full employment and maintaining stable prices, so the task of wrestling those quick price increases back under control will fall largely to Mr. Powell and his colleagues.
Understand Inflation and How It Impacts You
“Inflation is much too high, and we understand the hardship it is causing, and we’re moving expeditiously to bring it back down.” Powell said during a news conference last week. “It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all.”
Mr. Powell’s reappointment comes after an eventful first term, one in which he found himself at odds with the man who elevated him to chair and dealing with an economy that was essentially shut down overnight because of the pandemic.
Now, Mr. Powell will be leading a Fed that is fighting meaningful price increases for the first time in decades – and one that is undergoing a significant leadership shake-up. The Senate last month confirmed Lael Brainard, formerly a Fed governor, as Mr. Biden’s choice for the Fed’s vice chair, an influential position within the central bank.
This week, the Senate confirmed two other new Fed governors – Lisa D. Cook and Philip N. Jefferson. Mr. Biden has also nominated Michael S. Barr as the new vice chair for supervision, and his confirmation hearing before the Senate Banking Committee is scheduled for next week.
The Fed’s two newest governors – Ms. Cook and Mr. Jefferson – indicated during their confirmation hearings that they are focused on fighting inflation. Fed officials see stable prices as a critical building block for sustainable economic growth.
“High inflation is a grave threat to a long, sustained expansion, which we know raises the standard of living for all Americans and leads to broad-based, shared prosperity.” Cook said during her confirmation hearing. “That is why I am committed to keeping inflation expectations well anchored.”
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.
The Fed has already started raising interest rates to try and cool the economy, including making its largest increase since 2000 earlier this month. Mr. Powell and his colleagues have signaled that they will continue to push up borrowing costs as they attempt to restrain spending and hiring, hoping to bring demand and supply into balance and drive inflation lower.
While officials are hoping to bring down inflation without causing a recession, they have acknowledged that achieving that will be a challenge.
“I think we have a good chance to have a soft or soft-ish landing, or outcome,” Mr. Powell said last week, while adding: “I do expect that this will be very challenging. It’s not going to be easy. “
In addition to the new faces at the seven-person Board of Governors in Washington, several of the Fed’s 12 regional reserve banks are also experiencing personnel changes. Susan M. Collins has been selected as the president of the Federal Reserve Bank of Boston, and just this week it was announced that Lorie K. Logan will lead the Dallas Fed. Both will start this summer.
The heads of the Kansas City and Chicago Fed are both set to retire soon, paving the way for further leadership changes.
The Fed’s seven governors and the New York Fed president hold constant votes on monetary policy, while the other regional presidents rotate into and out of four voting seats.