According to a White House official, Janet Yellen, Treasury Secretary, was Powell's predecessor at Fed. She will play a crucial role in the debate about whether Powell should be reappointed.According to Mark Spindel of Potomac River Capital, who is also coauthor of The Myth of Independence about the Feds relationship and Congress, there's not much daylight between Powell and Yellen on their inflation views. Jay has the job of losing.Alex Wong/Getty ImagesBiden and Powell barely know each other. They only spoke once in their current roles at a White House meeting for financial regulators last week. However, Yellen worked closely with Yellen for six years at the central banking, including as her chief.Both officials are focusing on how fast the job market will recover and how long higher inflation can last. Powell mentioned the danger of raising rates too quickly, which is very unlikely right now. The Fed's main tool is to increase borrowing costs, which are aimed at ensuring prices don't rise too quickly. However, they also slow down activity, something that the central bank does not want to do while millions are out of work.Powell said that a large portion, or possibly all, of the inflation overshoot comes from categories directly affected by the economy's reopening.Officials at the central bank will closely monitor whether this data suggests a persistent increase in inflation over the coming months. Powell told reporters this month that he has pledged vigilance, humility, and a willingness to share his knowledge with others. He was referring to the difficulties of forecasting. This question will not be answered until autumn. His immediate political fate will depend on the work he has done.The Fed cannot do anything about inflation between now, and the hearings to elect the next Fed chair. This is because central bank policies take time to implement, according Jason Furman, who was chief economist under President Barack Obama.Inflation will be a factor in the decision to keep the Fed Chair. Although Powell is supported by prominent left-leaning groups, progressive groups have urged Biden to choose a more liberal candidate to help banks deal with climate change risks and to regulate lenders more aggressively. Others have asked the president to consider the fact that the Fed board is not diverse.As the Fed debates the future of monetary policy, Powell will have to communicate with a lot of people this summer. The most important decision for financial markets in the next years for policymakers will be when to stop the massive central bank support for the economy. This is a matter of increasing disagreement among policymakers.Some officials have suggested that interest rates could be raised as soon as 2022, an election year. This would create a contentious split within the central bank under Powell and his successor.Joe Biden speaks about the May jobs report at the Rehoboth Beach Convention Center, Rehoboth Beach (Del.) on June 4, 2021. Susan Walsh/AP PhotoThe Fed may decide to slow down its purchases of U.S. mortgage-backed securities and government debt later in the year as the economy recovers. To avoid another taper tantrum in 2013, when stock and bond markets fell sharply following a similar Fed process to wind down its bond purchases, the central bank has been slowly preparing financial markets.There are potential risks to Powell's political future and the economy from investors being spooked.Krishna Guha, Vice Chair of Evercore ISI Financial Research and an ex-New York Fed Official, stated that the September [policy] meeting could prove to be a significant one for Fed. Tapering is always a gamble. While you can prepare for it, they will most likely do so very carefully. However, at the end of day, we don't know how the market will react.The Fed's market support is being offset by a surge of cryptocurrencies, Special Purpose Acquisition Companies, and so-called "meme stocks", such as GameStop. This raises concerns that central banks are encouraging financial bubbles through their easy money policies.This could increase calls for a Fed chief that is more aggressive in regulation, a criticism Powell has been facing from progressives.Sheila Bair is a former Republican head at the Federal Deposit Insurance Corp. Sheila Bair was a bank regulator who argued that banks should be required to raise more loss-absorbing capital in these circumstances.She said that if you are concerned about overheating, this is the place to go.However, the financial markets aren't showing any signs of stress over the possibility of inflation. This suggests that they still trust Powell.According to Bill Spriggs, a Howard University professor and chief economist at AFL-CIO, the markets don't believe that inflation is a problem. His name has been suggested as a possible Powell replacement. He has done an excellent job explaining that this is just the beginning of what we will be re-entering normalcy.During a four year term that saw rate hikes and blistering attacks by Trump, turbulent funding markets, and a global pandemic, the Fed chair has maintained strong relationships with both his constituents on both sides of Congress. His candidacy shows his ability to adapt to the current political and policy environment, according to Ed Mills, Washington policy analyst at Raymond James.Mills described him as a Fed chair with nine lives.This report was contributed by Ben White.
