The President said he will fill the three remaining slots on the board, including a vice chair for supervision, a bank regulatory post, in early December.
Biden’s decision, reached after extensive consideration, strikes a note of continuity and bipartisanship at a time when surging inflation is burdening households and raising risks to the economy’s recovery.
In backing Powell, a Republican who was first elevated to his post by President Donald Trump, Biden brushed aside complaints from progressives that the Fed has weakened bank regulation and has been slow to take account of climate change in its supervision of banks.
If confirmed by the Senate, Powell would remain one of the most powerful economic officials in the world.
By either raising or lowering its benchmark interest rate, the Fed seeks to either cool or stimulate growth and hiring, and to keep prices stable. Its efforts to direct the U.S. economy, the largest in the world, typically have global consequences.
The Fed’s short-term rate, which has been pegged near zero since the pandemic hammered the economy in March 2020, influences a wide range of consumer and business borrowing costs, including for mortgages and credit cards. The Fed also oversees the nation’s largest banks.
In a second term, to begin in February, Powell would face a difficult and high-risk balancing act: Rising inflation is causing hardships for millions of families, clouding the economic recovery and undercutting the Fed’s mandate to keep prices stable.
But with the economy still 4 million-plus jobs shy of its pre-pandemic level, the Fed has yet to meet its other mandate of maximising employment.
If the Fed moves too slowly to raise rates, inflation may accelerate further and force the Fed to take more draconian steps later to rein it in, potentially causing a recession.
Yet if the Fed hikes rates too quickly, it could choke off hiring and the economic recovery.
Powell’s re-nomination must be approved in a vote by the Senate Banking Committee and then confirmed by the full Senate, which is considered likely.