johnson143_Tom WilliamsCQ Roll Call_laelbrainard Tom Williams/CQ Roll Cal

Reshuffle the Fed Board Now

Under the leadership of Jerome Powell, the US Federal Reserve seems headed for a massively consequential monetary-policy mistake. The best way to prevent it is to replace Powell with Lael Brainard, a Fed governor since 2014.

WASHNGTON, DC – Appointing the Chair of the Board of Governors of the United States Federal Reserve is at least as consequential as choosing a US Supreme Court justice. But while no Democratic president would put a Republican on the Supreme Court, President Joe Biden may be giving serious consideration to reappointing Jerome Powell, a Republican appointed four years ago by President Donald Trump, as Fed Chair.

The main argument being made in favor of reappointing Powell is that “the Fed has done a good job.” Looking forward, however, under current leadership the Fed seems headed for a massively consequential policy mistake. The best way to prevent this outcome is to replace Powell with Lael Brainard, a Fed governor since 2014.

The Fed is in the process of figuring out when and how to tighten monetary policy, in the first instance by removing some of the quantitative easing that was intensified during the early phases of the COVID-19 pandemic. Reducing the volume of monthly bond purchases will push up longer-term interest rates, and this will likely be followed by increases in short-term interest rates.

We hope you're enjoying Project Syndicate.

To continue reading and receive unfettered access to all content, subscribe now.

Subscribe

or

Unlock additional commentaries for FREE by registering.

Register

https://prosyn.org/85pWert