Senate Confirms Fed Chair Jerome Powell To Second Term As Inflation Spikes And Markets Collapse
The Senate on Thursday confirmed President Joe Biden’s appointment of Jerome Powell to a second term as Federal Reserve Chair, solidifying the central bank’s top leadership as it raises interest rates to fight the highest inflation rate in 40 years—and tackles a steep market sell-off spurred by the tighter policy.
In a vote of 80 to 19 on Thursday afternoon, the Senate confirmed Powell for a second term ending in early 2026, with 6 Democrats and 13 Republicans voting against the nomination.
First appointed to Fed leadership by President Barack Obama in 2012, Powell has served as chair since the end of Treasury Secretary Janet Yellen’s Fed term in 2018; Biden tapped him for a second term back in November.
His policy response to the pandemic was widely praised for staving off an economic depression, but the Fed chair has increasingly faced criticism that the central bank waited too long by only starting to raise interest rates in March.
For his part, Powell started to acknowledge inflation is “much too high” in late March and pledged to “move expeditiously . . . to restore price stability,” saying earlier this month the central bank would move to raise rates by 50 basis points in June and July—more than Fed officials forecast at the beginning of the year.
Stocks have struggled in response to the threat of rising rates, which typically hurt corporate earnings, with the S&P 500 tumbling 19% this year.
The stock market started to recover from its pandemic-induced crash in 2020 on the day Powell pledged to use the central bank’s “full range of tools to support the U.S. economy,” and his response helped fuel one of the strongest bull markets on record. However, uncertainty has come to a head in recent weeks as accommodative policy is reversed to ease spiking inflation. The tech-heavy Nasdaq posted its worst month since 2008 in April and has plunged 29% this year. Meanwhile, the U.S. economy unexpectedly shrank 1.4% last quarter.
Late last month, the Senate confirmed Lael Brainard, then a Fed governor, as the central bank’s vice chair. The sole Democrat on the Fed’s seven-member board, she emerged as a top Fed chair contender last year as progressive Democrats mounted an effort to unseat Powell over his moderate views on climate change. In October, Brainard outlined an early blueprint for climate-related stress tests for large financial institutions akin to the required stress tests brought on after the Great Recession to assess banks’ capital requirements.
A series of revelations about investments made by Fed officials during the pandemic cast doubts on Powell’s potential reappointment late last year. At the time, Sen. Elizabeth Warren (D-Mass.) said he “failed as a leader” during the scandal. “Setting the right culture at the Fed and making sure safeguards are in place to prevent self-dealing… should be the minimum standard any [Fed] chair should meet,” Warren said, reiterating her opposition to his appointment. “And, once there is a problem, a quick and aggressive response is critical—Chair Powell has failed at both tasks.”