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Between a COVID-induced recession, unprecedented stimulus, and, now, rising inflation, setting fiscal policy the past couple of years has been difficult sailing.
For the Biden administration, however, the path forward is simple: steady the ship and keep Jerome Powell at the helm. On Monday, the strategy became policy when the White House nominated the Federal Reserve chairman for a second four-year term.
Politically, the decision isn't without its drawbacks. Some members of the Democrat's progressive caucus pushed for Fed Governor Lael Brainard for the top spot, and with rising inflation dominating the news, a change may have helped Biden's sinking approval rating.
Instead, the president is trusting the man that may have averted long-lasting economic ruin by keeping interest rates stubbornly low in hopes of jump-starting a COVID-crashed economy, higher prices be damned.
Whether or not today's inflation is as transitory as the Fed insists remains to be seen, but, so far, markets appear fairly satisfied with the status quo:
- The Dow Jones Industrial Average jumped 215 points following the announcement, while the S&P 500 increased 0.4% to set an intraday record high, and ended up closing down about 1 percent.
- Shares of JPMorgan and Morgan Stanley rose 2.7% and 3% respectively immediately after the news broke and finished up on the day. Shares of Goldman Sachs jumped almost 9%.
Bonds. Jerry's Bonds: The Powell pick is not without controversy. In October, financial disclosures of multiple Fed officials revealed extensive stock trades as the Fed was making moves to boost the market. And Powell himself disclosed his ownership of municipal bonds as the Fed was buying them.
Aisle Chatter: Powell, a Republican first appointed to the Fed Board by Barack Obama in 2012 and to Fed chair by Trump in 2018, has long garnered bipartisan respect. Already, senators for both teams are backing his renomination. On the Democratic side, Senators Jon Tester, Mark Warner, Tina Smith, and Banking Committee chairman Sherrod Brown have come out for the pick. Meanwhile, Republicans Mitch McConnell, Mitt Romney, and Patrick Toomey are in as well.