Senate confirms Powell for second term as Fed chief

The Senate on Thursday voted to confirm Federal Reserve Chairman Jerome Powell for a second term leading the central bank’s board of governors as the Fed scrambles to get ahead of high inflation.

Senators voted 80-19 to approve Powell for another four-year stint chairing the Fed board, a position he was first appointed to by former President Trump.

Sens. John Boozman (R-Ark.), Mike Braun (R-Ind.), Tom Cotton (R-Ark.), Ted Cruz (R-Texas), Josh Hawley (R-Mo.), Ron Johnson (R-Wis.), Mike Lee (R-Utah), Ed Markey (D-Mass.), Bob Menendez (D-N.J.), Jeff Merkley (D-Ore.), Jon Ossoff (D-Ga.), Rand Paul (R-Ky.), Marco Rubio (R-Fla.), Bernie Sanders (I-Vt.), Rick Scott (R-Fla.), Richard Shelby (R-Ala.), Dan Sullivan (R-Alaska), Elizabeth Warren (D-Mass.) and Roger Wicker (R-Miss.) voted against Powell. Sen. Pat Toomey (R-Pa.) did not vote.

Powell, a Republican, joined the Fed board in 2012 on the appointment of former President Obama and was picked by Trump in 2017 to succeed now-Treasury Secretary Janet Yellen. He won broad bipartisan support over his first term for resisting Trump’s pressure to slash interest rates while the economy was strong and for the Fed’s largely successful response to stabilize financial markets during the outbreak of the COVID-19 pandemic.

Under Powell’s watch, the Fed played a crucial role in the U.S economy’s rapid recovery from the depths of the pandemic-driven recession. The central bank kept interest rates at near zero levels throughout most of the pandemic, purchased trillions in Treasury and mortgage-backed bonds to keep money flowing through the economy and deployed billions of dollars in emergency loans to financial institutions, businesses and municipal government agencies.

In the two years since, the U.S. has recovered all but roughly 1.2 million of the 21 million jobs lost at the onset of the pandemic, erased the hole in gross domestic product it created, and has a far stronger economy than other peer nations hit hard by COVID-19.

President Biden touted Powell’s leadership of the Fed and its results for the economy when he renominated the Fed chief in November. Despite pressure from his left flank to replace Powell with a bona fide liberal who would tighten bank rules, Biden said it was essential to preserve “stability and independence” on the Fed board as inflation rose far faster than most economists expected.

Both Powell and Biden, however, are facing intense pressure to curb inflation after it continued to surge to four-decade highs — driven in part by the fiscal and monetary stimulus they deployed to bolster the economy. While the annual inflation rate fell to 8.3 percent in April from 8.5 percent in March, according to Labor Department data released last week, the drop was largely driven by a temporary decline in gas prices. 

Powell and other top Fed officials have acknowledged they waited too long to begin raising rates and reducing its holdings of bond purchases, both of which may have halted the rise in inflation earlier. While the Fed expected the supply and labor shortages fueling inflation to ease by last autumn, both have lasted far longer than central bank officials and many economists expected.

The Fed is also facing serious obstacles from abroad as it attempts to rein in prices at home. The war in Ukraine and economic fallout of sanctions have drastically increased the prices of oil, natural gas, wheat and other key commodities, and COVID-19 lockdowns in China have derailed industrial production abroad while deepening port backlogs and shipping delays.

The Fed has hiked interest rates by a combined 0.75 percentage points in two meetings since March and are expected to keep raising rates well into 2021. The bank is aiming to raise interest rates fast enough to slow the economy to a more sustainable pace, but slow enough to prevent a deep economic downturn.

Even so, Powell acknowledged last week it would be “very difficult” to achieve a soft landing.

The Senate this week also confirmed Biden’s nominations of Michigan State economics professor Lisa Cook and Davidson College Vice President Philip Jefferson as members of the Fed board. The Senate last month confirmed Fed board member Lael Brainard to serve as vice chair of the board of governors.

The Fed board, which holds up to seven seats, also includes Michelle Bowman and Christopher Waller, both of whom were nominated by Trump. Biden has additionally nominated former Obama administration official Michael Barr as Fed vice chair of supervision.

Updated at 3 p.m.