President Biden has a big decision to make: Whether to reappoint Jerome Powell to a second term as Federal Reserve chairman or choose someone else for one of the world's most powerful economic jobs.

Transcript

SCOTT DETROW, HOST:

The chairman of the Federal Reserve has one of the most powerful economic jobs in the world. They can move markets with a single phrase. Under Jerome Powell's leadership, the Fed has been extremely active during the pandemic, helping to speed the recovery of more than 17 million jobs. Powell's term is set to expire this winter. And now President Biden has to decide whether or not the Fed chairman will keep his job. NPR's chief economics correspondent Scott Horsley joins us now. Good morning, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Scott.

DETROW: So what are the odds here that Powell stays on as Fed chair?

HORSLEY: Well, they're reasonably good. On Powell's watch, the Fed has been aggressive about slashing interest rates, setting up an array of emergency lending programs, pumping out trillions of dollars in an effort to prop up the economy. Some of those efforts have fallen short. But the Fed chairman is getting generally high marks. What is more, there is a tradition in the country of not changing Fed leaders even when the party in control of the White House changes. That's a way to insulate the central bank from partisan politics. Now, former President Trump ignored that tradition when he dumped Janet Yellen as Fed chair and replaced her with Powell. But oddsmakers think Biden will honor the tradition and stick with Powell even though it's not quite as much of a lock as it was, say, a month ago.

DETROW: Yeah. You know, I was covering the president on Friday. Another reporter asked about Powell's future. And Biden did not answer. He joked, It's been nice talking with you. So why isn't this a lock? And why is the president staying guarded so far?

HORSLEY: Well, Powell does have his critics, especially among progressives like Massachusetts Senator Elizabeth Warren. She sits on the Senate Banking Committee. Warren accuses Powell of watering down some of the bank regulations that were put in place after the financial crisis, and says she will oppose his nomination for a second term

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ELIZABETH WARREN: Over and over, you have acted to make our banking system less safe. And that makes you a dangerous man to head up the Fed.

HORSLEY: Now, that argument has not necessarily gotten a lot of traction. Even the authors of the Bank Regulation Law passed after the financial crisis have defended Powell and said he should get a second term. But more recently, Powell's critics have seized on another controversy, which has just recently come to light, this one involving allegations of unethical trading by some other Fed officials.

DETROW: Yeah. What's going on with that story? Explain a little more.

HORSLEY: Yeah. The Fed as an institution has been scarred by these reports initially in The Wall Street Journal and Bloomberg that two regional Fed bank presidents, as well as a Fed board member, were actively trading stocks and other securities last year at a time when the central bank was, you know, super involved in financial markets. All three men have defended their actions. But the two regional bank presidents have retired. And Powell has called for an inspector general's review, as well as stricter ethics rules going forward. Critics say Powell has not gone far enough. And they are using this as another argument for why Biden should choose another nominee. Progressives would prefer to see someone like Lael Brainard, who's a Democrat, as chair. She currently serves on the Fed's board of governors. And she's viewed as possibly more aggressive on things like bank regulation and climate change.

DETROW: Scott, you are spending a lot of your time explaining to listeners how delicate and, frankly, weird the economy is right now.

HORSLEY: (Laughter).

DETROW: How does that affect the president's thinking, because everything is so fragile?

HORSLEY: Yeah. This is a sensitive time. You know, job growth has slowed sharply in the last couple of months. But consumer prices are still climbing. For the Fed, which tries to promote full employment and keep inflation under control, this is a real minefield. One political consideration for Biden is he's likely to get a lot of heat from Republicans about inflation next year if price hikes don't settle down by then. Having a Republican like Powell in charge of the Fed could give the White House a little bit of political cover. As chair, Powell has pushed a policy that says interest rates should stay near zero until the country is back to full employment.

DETROW: That's NPR's chief economics correspondent Scott Horsley. Thanks, Scott.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Tags: Lael Brainard  president biden  Jerome Powell  inflation  Federal Reserve