The Federal Reserve chair will be re-elected by President Biden, ensuring policy continuity at a time of rapid inflation and economic uncertainty but potentially angering progressive Democrats who had been clamoring for a change in leadership.
The central bank's top official is reappointed regardless of partisan identity, a tradition that was bucked by former President Donald J. Trump who appointed Mr. Powell instead of Janet L.
Mr. Biden and his top aides thought that Mr. Powell had done a good job in supporting the economy through the recession and the recovery. The bet is that Mr. Powell is the right leader to steer the Fed through a storm of price increases, which administration officials believe will diminish next year.
Lael Brainard will be nominated by Mr. Biden to be the Fed's vice chair. If the president had chosen Ms. Brainard instead of Mr. Powell, the White House would have had a difficult confirmation battle.
The stakes are high.
In the year through October, consumer prices have increased at the fastest pace in more than three decades. The central bank is charged with keeping consumer prices stable while trying to get people to work, and that balance could require difficult policy choices in the months ahead.
Mr. Biden has been hurt politically by the rising prices of food, gas and airplane tickets. The president has tried to assure Americans that his economic policies will calm inflation, and he is expected to repeat that message during his speech on Tuesday. The politics of price increases have become intertwined with the Fed's decisions in recent weeks, as the president pushes Senate Democrats to coalesce around a bill that would address climate change and social policy.
Mr. Biden said he was certain that both Mr. Powell and Ms. Brainard would work to keep the economy on track.
Mr. Biden said he was confident that Chair Powell and Dr. Brainard would make the economy stronger than ever before.
The reappointment of Mr. Powell suggests that the White House is not going to completely remake the Fed. Two more seats will open early next year, giving Mr. Biden room to appoint at least three of seven governors. The Fed's vice chair for supervision is a powerful position and must be filled by the president.
Moderate Democrats and progressives want Mr. Biden to pick a diverse slate of leaders for the Fed who would prioritize tough bank regulation and do what they could to address climate change risks in the financial system.
Mr. Powell has come under fire for being slow to address climate change and for backing measures that have eroded post-crisis financial rules. Mr. Biden said that he expected Mr. Powell and Ms. Brainard to address the economic risks posed by climate change and stay ahead of emerging risks in our financial system.
It is not known whether that will be enough to appease Mr. Powell's critics. Senator Elizabeth Warren of Massachusetts called Fed chair Powell a dangerous man during his tenure. On Friday, Senator Whitehouse of Rhode Island and Senator Jeff Merkley of Oregon released a statement opposing Mr. Powell's reappointment. Republicans who supported Mr. Powell will likely vote to confirm him again.
Senator Patrick J. Toomey of Pennsylvania said he would support Mr. Powell's nomination.
A complicated economic moment influenced Mr. Biden's decision. The cost of used cars, couches and even food and rent have gone up due to labor shortages and supply lines that have helped to push inflation higher. The labor market is missing millions of workers compared with before the epidemic. The Fed may have to balance its two goals as it charts its future policy path.
The central bank has decided to slow its large bond-purchase program, a first step toward withdrawing monetary policy support that will leave it more flexible to raise interest rates next year if necessary.
The federal funds rate has been near-zero since March 2020 and has kept many types of borrowing cheap and helped to fuel home and car purchases and other types of demand that in turn set the stage for strong hiring. Raising it could make growth less vigorous.
Trying to slow the price gains would be costly. The Fed is hoping to give the job market more time to heal, as workers are still returning to work after being laid off during the Pandemic. Many people may not be able to find work because they lack child care or because of health concerns, because of the continued waves of infections.
It will be difficult to navigate the next steps.
Mr. Powell was elevated to Fed chair by Mr. Trump, who replaced Ms. Yellen, who had done a good job.
Some economists had argued that it would be worth restarting that pattern. The logic said that this would show that the Fed is a technocratic body that sets prudent economic policy without taking into account political considerations.
The central bank has pursued full employment with gusto because of Mr. Powell's track record as chair. The Fed helped the economy through the start of the coronaviruses and unveiled a series of market rescue programs that kept Wall Street functioning and averted a financial disaster that could have cascaded through the economy.
Mr. Powell faced opposition from some progressive Democrats because of his history of voting for changes that made financial regulation less strict for banks, and because of an ethics scandal that took place while he was overseeing the central bank. Two of the Fed's 12 regional presidents made significant financial trades for their private accounts in 2020, when the Fed was actively saving markets from the effects of the swine flu.
Mr. Powell said that he defers to the person Congress has confirmed to be the bank supervision role when it comes to regulatory matters. The news of last year's financial activity broke, and the Fed has unveiled new ethics rules.
Presidential nominees to the Fed Board and Fed leadership positions must be voted on by the Senate.
