The US Senate on Tuesday confirmed the nomination of Lael Brainard for a four-year term as Vice President of the US Federal Reserve, raising her to the Fed’s second tier position amid the central bank’s fiercest fight against the inflation for four decades.
His confirmation came in a 52-43 vote in the Senate, with seven Republicans and all Democrats present voting in favour. US President Joe Biden nominated Brainard in November.
Brainard, 60, has been a member of the Fed’s Board of Governors since 2014, and his rise to a prominent role in policymaking follows a long career as an economics official during previous Democratic administrations. She served as an adviser to President Bill Clinton in the late 1990s before becoming the Treasury’s top international affairs official under President Barack Obama from 2009 to 2013.
Brainard, the only Democrat on the board so far, has generally supported keeping interest rates low to support growth and hiring, making her a “dove” in the parlance of the Fed. The “hawks” generally support higher rates to avoid inflation.
Brainard’s confirmation comes as three other candidates for Fed board positions await confirmation. They include President Joe Biden’s nomination of Jerome Powell for a second four-year term as Fed chair. Powell has served in a temporary position since his first term expired in early February and enjoys broad bipartisan support in the Senate.
Biden also named Lisa Cook, an economics professor at Michigan State University, and Philip Jefferson, an economist and academic dean at Davidson College in North Carolina, to fill two vacancies on the Fed board.
If confirmed, Cook would be the first black woman to serve on the Fed’s board in its 108-year history; Jefferson would be the fourth black man on the board. Jefferson was unanimously approved last month by the Senate Banking Committee.
Cook has drawn nearly unified opposition from Senate Republicans, who argue she doesn’t have enough experience researching interest rate policy. They also expressed concern that she is not dedicated to fighting inflation. In an earlier Senate procedural vote that was 50 to 49 in his favour, Cook needed the vote of all Democratic senators.
Sen. Sherrod Brown, the Ohio Democrat who leads the Senate Banking Committee, sought on Tuesday to delay a procedural vote on Cook’s nomination because two Democrats had tested positive for COVID-19 and were unable to vote. Republicans objected, forcing the vote to continue. The vote is likely to fail, meaning Senate Democrats will have to try to confirm Cook later when all of their members are healthy.
Cook, who holds a doctorate in economics from the University of California, Berkeley, served as an economist on the White House Council of Economic Advisers from 2011 to 2012. She also served as an adviser to the Biden transition team on Fed and bank regulatory policy.
Brown sharply criticized Republicans on the Banking Committee for their opposition to Cook.
“Republicans on my committee have a consistent record of votes against black women,” Brown said, citing their near-unanimous opposition to the nominations of Sandra Thompson to lead the agency that regulates mortgage giants Fannie Mae and Freddie Mac, and to the Biden’s nominee for the Supreme Court. , Ketanji Brown Jackson. “They should be ashamed of themselves.”
If confirmed, Cook and Jefferson are unlikely to change Fed policy in the coming months, economists say, although they will help balance the hawkish views that now dominate the board. Fed governors often defer to the president and are much less likely to cast dissenting votes at Fed meetings, unlike some regional bank presidents.
“Even the most dovish current members (of the Fed) recognize that inflation is so obviously too high, it’s a tax on households, it has to be dealt with,” said Ellen Gaske, chief economist at the PGIM asset manager.
Financial markets expect the Fed to continue raising rates in a range of 2.5% to 2.75% by the end of the year. This would represent a significant increase from its current level of 0.25% to 0.5%.
Many economists believe the Fed will raise its benchmark short-term interest rate by half a percentage point at each of its next three meetings, in May, June and July, to try to rein in the acceleration price increases.
Such rate hikes would be larger than the Fed’s usual quarter-point increases and would likely result in higher borrowing costs for home loans, car loans and credit cards. These higher costs could, in turn, slow consumer spending and weaken the economy as a whole.
Brainard was the architect of a Fed policy framework, adopted in August 2020, under which it said it would no longer raise rates just because the jobless rate had fallen to a low level that could boost inflation. Instead, the Fed said it would wait for real evidence that prices are accelerating.
That framework has been blamed by some critics for contributing to the Fed’s delay in raising rates as high inflation erupted last year – a claim Powell disputes.
Brainard also said the Fed could factor climate change more directly into banking supervision, a stance that has drawn opposition from many Senate Republicans.
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