Aurelia Butler

(Reuters) – Atlanta Federal Reserve President Raphael Bostic said on Monday President Joe Biden’s decision to nominate Jerome Powell for a second term as Fed chair removes uncertainty for policymakers and is a “helpful” development as they approach some critical decisions.”This decision really does take some uncertainty out of the Federal Reserve as an issue, and I think that’s helpful for all of us,” Bostic said in an interview on Bloomberg Television. He added that Biden had made a “fine choice” in renominating Powell as well as nominating Governor Lael Brainard to be Fed vice chair, the central bank’s No. 2 leadership role. More

WASHINGTON (Reuters) – U.S. President Joe Biden on Monday nominated Federal Reserve Chair Jerome Powell for a second four-year term, positioning the former investment banker to continue the most consequential revamp of monetary policy since the 1970s and finish guiding the economy out of the pandemic crisis. Lael Brainard, the Federal Reserve board member who was the other top candidate for the job, will be vice chair, the White House said.Combined, the nominations pair two monetary policy veterans and collaborators on a recent overhaul of Fed policy, which shifted the emphasis to jobs from the preeminent focus on inflation established some four decades ago. Their challenge will be to keep U.S. job growth underway while also ensuring recent strong inflation doesn’t become entrenched. “We’ve gone from an economy that was shut down to an economy that’s leading the world in economic growth,” Biden said in remarks at the White House with the nominees. Citing Powell’s “steady leadership” that calmed panicked markets, and his belief in monetary policies that support maximum employment, Biden said “I believe Jay is the right person to see us through.”The United States is still dealing with the impacts of the pandemic, including inflation, he said but the country has made “enormous progress” including adding nearly 6 million jobs since he was sworn in and increasing wages – positive signs that are a testament to the Federal Reserve. “I respect Jay’s independence,” Biden said, directly addressing critics from his own Democratic party who wanted him to bump Powell, a Republican, for a Democrat. “At this moment of both enormous potential and enormous uncertainty for our economy, we need stability and independence at the Federal Reserve.” Powell, 68, and Brainard, 59, will both need to be confirmed in their Fed leadership roles by the Senate, currently controlled by Biden’s Democratic party but closely divided. The president has for now left open several other Fed positions, including that of vice chair for supervision, that he may fill as soon as next month and that could be used to toughen bank regulation, improve diversity, and make other changes his supporters have urged for the Fed.But for the Fed’s core monetary policy – managing inflation and setting interest rates as the economy reopens from the pandemic – Biden opted for continuity.”They are veterans and mature public servants and there has been very little difference between them” on monetary policy said Adam Posen, president of the Peterson Institute for International Economics. Together Powell, a moderate Republican elevated by former President Donald Trump, and Brainard, who served in prior Democratic administrations, “gives potentially non-partisan credibility to a more realistic assessment of inflation risks” the United States faces.That reassessment could mean interest rate increases coming sooner than later if inflation, which both promised to fight, proves more persistent than expected.“We know that high inflation takes a toll on families,” Powell said in brief remarks at the White House event where Biden announced the nominations. Brainard also pledged to support a growing economy “that includes everyone,” and a Fed that “serves all Americans in every community.” U.S. stocks hit record highs after the news. Treasury bond yields also rose and the dollar strengthened.Powell’s reappointment had been encouraged by a cross-section of investors and economists with both conservative and liberal leanings, and was welcomed by Congress members of both parties.The Fed’s aggressive actions at the start of the coronavirus pandemic in early 2020 were hailed as staving off a potential Depression. Later, some lauded his focus on jobs in the new policy framework launched just over a year ago, and others argued it would be too risky to oust the Fed chair during a sensitive transition from the emergency measures taken during the health crisis.CHANCE TO CEMENT A LEGACYPowell’s second term would begin in early February, and the coming months will be crucial in determining whether his legacy will be as the Fed chair who elevated employment to the center of Fed policy, or as the one who let inflation surge and reestablish itself as a chronic problem.Powell, who joined the Fed as a governor in 2012, did not anticipate being named chair when Trump was elected. With a pre-Fed career that had included eight years as a partner at The Carlyle Group (NASDAQ:CG), one of the world’s largest private equity firms, and no formal economics training, he had instead eyed the vice chair for supervision position eventually filled by Randal Quarles. He was confirmed as Fed chair on an 84-13 vote, with Kamala Harris, now Biden’s vice president, among those opposing him.He soon ran afoul of Trump, who hurled unprecedented public broadsides against Powell over Twitter (NYSE:TWTR) and in frequent media appearances. At one point Trump labeled Powell an “enemy” of the United States for raising interest rates and explored whether he could fire him.Powell not only survived but arguably grew in the job.Initially hawkish as a governor, upon assuming the helm for U.S. monetary policy he considered himself a student at first, paying particular attention to arguments over whether the Fed’s focus on inflation had disadvantaged workers. The years since the 2007 to 2009 financial crisis had convinced many that was the case. In November 2018, Powell launched a policy review that culminated in August 2020 with the adoption of an approach allowing economic expansions to run longer and “hotter,” with temporarily higher rates of inflation. Ideally that would lead to job gains that reach broadly into society and narrow the gaps in unemployment among different demographic groups. It was an approach that conformed to what seemed then to be the changing nature of the U.S. economy, with embedded low inflation and low interest rates, and adapted as well to the demands of a pandemic crisis that threatened a permanent hole in the U.S. job market.Just over a year into that new approach, however, inflation is running at levels not seen in decades as resurgent demand for goods and services outstrips the supply of materials and labor in an economy still shaking off the rust of pandemic shutdowns.”The new leadership team faces some very tough calls in the period ahead,” wrote Evercore ISI vice chair Krishna Guha. More

NEW YORK (Reuters) – U.S. President Joe Biden’s pick of Jerome Powell to continue as Federal Reserve chair reassured investors who said it gave some predictability as the central bank prepares to start hiking rates and slows the pace of bond buying. Many investors had hoped that Powell, who was nominated as chair by President Donald Trump in 2017, would be renominated by Biden for another four-year stint. On Monday, Biden nominated Powell for a second four-year term, with Lael Brainard, the Federal Reserve board member who was the other top candidate for the job, as vice chair. Biden also has three Fed seats to fill, including the vice chair for supervision, and intends to pick those in early December.Powell’s current term, which is due to run out in February 2022, has proven positive for risk assets, with the S&P gaining 69.7% since his appointment on Feb. 5, 2018, and hitting a series of new records in part helped by emergency measures the Fed launched in response to the coronavirus pandemic.“My reaction is one of relief,” said Peter Tuz, president, Chase Investment Counsel, Charlottesville, Virginia. “He was a steady hand, I think people liked in general the policies that he enacted since (COVID-19) first became an issue.” While Tuz said that Powell was “liked by both parties, he has been a pretty stable force.”Powell had always been the favorite, but he was seen as less of a slam-dunk after his odds in betting markets fell following sharp criticism of his performance by progressive Democrats and a trading scandal among Federal Reserve officials.Online betting website PredictIt gave Powell a 79% chance of being confirmed by the U.S. Senate as of Monday morning, down from a 90% chance on Sept. 12, while the odds that Federal Reserve Governor Lael Brainard would be nominated had increased to 23% from a low of 6% in September. While the leadership of the U.S. central bank is always important to markets, Biden’s decision takes on heightened significance this year as the Federal Reserve starts tapering its $120 billion in monthly bond purchases. At the same time, the Fed is confronting an historic surge of inflation as global supply chains remain disrupted by the coronavirus pandemic. The Fed earlier in November released its asset purchase schedule as it begins to slow purchases.”The markets are going to take this as a sign of relief,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management. Pavlik said that Brainard taking the vice chair role “at least puts some kind of pressure on Powell to not to move too quickly with raising rates.”    Brainard, who was nominated to the Fed board by former President Barack Obama in 2014, is widely seen as more dovish than Powell in part because of her push to retain super-easy monetary policy until there is more progress on job recovery.Ahead of the announcement, markets had priced in some risk of Brainard being elevated, and the news of Powell caused fixed income markets to price in “a bit more Fed tightening” while bank stocks gained, “with Brainard being viewed as more dovish on monetary policy,” wrote analysts at TD Securities. U.S. government bond yields, which move inversely to prices, rose on the news, with those on two- and five-year Treasuries hitting their highest levels since early 2020. The dollar extended gains against a basket of currencies and the S&P 500 gained but then reversed by the end of the day.Futures on the federal funds rate, which track short-term interest rate expectations, have fully priced in a quarter-point tightening by next June, up from more than 90% before Biden’s announcement. Analysts at NatWest said that while in a high inflation environment the difference between Powell and Brainard would be “basically nil”, they said “it is possible one can argue a taper acceleration” is more likely in December under Powell. (Reporting David Randall; additional reporting by Stephen Culp and Shreyashi Sanyal; additional reporting by Gertrude Chavez-Dreyfuss; writing by Megan Davies; editing by Nick Zieminski) More

ABOARD AIR FORCE ONE (Reuters) – U.S. Federal Reserve Chair Jerome Powell underscored his commitment to putting climate change at the center of the central bank’s policymaking decisions during his conversations with President Joe Biden, the White House said on Monday.Biden on Monday renominated Powell, a Republican, to another four-year stint at the helm of the Fed, disappointing Democratic progressives who had pushed the White House to name a tough new regulatory chief to crack down on banks on issues such as climate change and fair lending.Speaking to reporters aboard Air Force One, press secretary Jen Psaki said the Fed had taken important steps forward under Powell, including identifying climate change as a key risk that needs to be addressed, working with other central banks to mitigate climate change, and hiring a top climate economist.”He did reiterate his commitment to that during their discussions,” Psaki said.Psaki said Biden hopes to make decisions soon on how he would like to fill the seats that remain open on the Federal Reserve’s Board of Governors.”He is hoping to make decisions soon,” she said. Biden has three other Fed seats to fill, including the vice chair for supervision, and intends to pick those in early December, the White House said earlier Monday.Critics fault Powell for not moving more decisively to address climate change in his first term.Treasury Secretary Janet Yellen, who held the top Fed job before Powell, told CNBC earlier the central bank was now gearing up to include analysis of climate change as part of its stress testing because it “poses a major risk to financial institutions.””The Fed has made considerable strides on bringing evaluation of how climate risks affect the banks it supervises. It’s doing very good work on that, and is gearing up … to do scenario analysis of the risks facing the banks and to use it in supervision,” Yellen said. More

The IMF’s executive board approved a long-delayed $700m disbursement to Ukraine on Monday, propping up the war-torn country amid fears that Russia was plotting a deeper invasion.The newly arriving funds mark a second tranche from a $5bn Stand-By Arrangement programme agreed in the spring of 2020 to help Ukraine cope with the pandemic. It follows a $2.7bn IMF allocation of special drawing rights (SDR) extended to Ukraine this summer, as well as €600m in EU financing provided last month.“Ukraine’s IMF-supported economic programme aims to help the authorities address the effects of the Covid-19 shock, sustain the economic recovery, and move ahead on important structural reforms to reduce key vulnerabilities,” the fund said late on Monday.Arrival of these funds, as well as extension of the IMF programme through to June 2022, provides a critical and timely financial cushion for Kyiv.US and European officials have sounded alarm bells this month over a mushrooming build-up of 90,000-114,000 Russian troops near the country’s borders. They, along with Ukrainian officials, warn that Moscow could be plotting a deeper invasion after annexing the Crimean peninsula in 2014 and fomenting a proxy separatist war in the eastern Donbas region that has claimed some 14,000 lives.

Multibillion-dollar financial backing from the IMF, World Bank and other international financial institutions, as well as the US and EU, has been critical to shoring up Ukraine since Russia began its aggressive policies.The IMF tranche was delayed for about a year by a combination of foot-dragging on reforms by President Volodymyr Zelensky’s administration and a constitutional court ruling last autumn initiated by pro-Russian parties that threatened to neuter newly established anti-corruption institutions.Recent legislation adopted by Zelensky’s ruling majority in parliament addressed the IMF’s concerns by improving independence of both anti-corruption bodies and the central bank.Zelensky wrote on Twitter: “Grateful to [the IMF] board of governors for the decision to complete the review of the stand-by program on the allocation of a tranche of about $700m. We’ll use these funds to support the financial system and combat Covid-19.” Attending the Halifax International Security Forum this weekend, Oleksiy Danylov, Ukraine’s national security chief, called on the US, EU and other western backers to strengthen military assistance and other forms of support for Kyiv while warning that Russian president Vladimir Putin “understands only the language of force”.“By drawing troops to the Ukrainian border, Russia is trying to aggravate the security situation in the region as much as possible to raise stakes at future talks at the table,” he added. More