Jay Powell's complicated second act at the Federal Reserve

Jerome Powell

will remain chairman of the

After weeks of speculation,

has announced that he will propose Powel for a second term. The decision almost automatically implies the continuation of the current Fed chairman, who in 2017 won 84 votes in the Senate in favor of his appointment and only 13 against. And it comes at a time when rising

and Americans' reluctance to join the job market have greatly complicated central bank policy.

Biden's decision

undoubtedly

, led by Sen.

, which has described Powell as a "dangerous man", due to the position of the chairman of the Federal Reserve in favor of relaxing financial regulation. However, Powell, who has proven to be a top politician, has 'worked' for the Senate in recent weeks, making his confirmation for a second term much easier than that of the candidate on the left,

In return, Biden has proposed as

to Brainard, who is currently a member of the board of the central bank. In terms of monetary policy management, the differences between Powell and Brainard are minuscule. Where both diverge is in matters of financial regulation, since the second is in favor of tightening the supervision of large financial institutions. Brainard's nomination will likely be tougher in the Senate, where most of the Republican opposition will vote against her. Currently

has five Republican members and one Democrat (Brainard), plus one vacancy. In the coming months, however, a series of mandates for the body conclude, so that by the end of 2022 there could be five Democrats and two Republicans.

The announcement will come at a difficult time for the central bank. For the first two years of Powell's tenure, the United States had full employment without inflation. That is a dream situation for a central bank, and more so for the Federal Reserve, which has among its mandate both to

, to keep

and, finally, to achieve

. These are three objectives that can easily be contradictory, making it difficult for the issuing institute to act.

Then came covid-19, and all monetary policy was based on

. Now, however, the situation is much more complicated:

, and 4.2 million Americans who left the job market when the pandemic crippled the economy have not returned.

Combining price control with job creation is squaring the circle.

However, that is the job of the Federal Reserve.

The great asset of the Central Bank is precisely the tremendous capacity for political maneuvering of Powell, who was nominated to the issuing institute by a Democrat (Obama), elevated to the presidency by a Republican (Trump), and, now, maintained in it by another Democrat (Biden).

Inflation, your main challenge

Because a second term for Powell is, above all, a symbol of the political prowess of the 68-year-old financier. Powell is not an economist, but a lawyer, which confirms the growing dominance of the

of the great global financial institutions. Until he came to the Federal Reserve, his experience in public policy was minimal, and it was reduced to a few months in the Treasury Department during the presidency of

Most of his professional career had been in the

, where he had worked in several law firms, the now-defunct investment bank

, the venture capital fund

(famous because among its investors was the Bin Laden family and among its employees former President George Bush and former British Prime Minister John Major), and other institutions, including a specialized fund for investment in renewable energy that he created.

Despite being a

, Powell has shown formidable political ability. During his tenure, he has carried out a

to contain the effects of covid-19. It has also incorporated into the Fed's objectives the idea that monetary policy should

in the United States. This second concept is something that Democrats support, but that Republicans flatly reject. Powell has also relaxed the central bank's anti-inflationary policy.

This last element is, without a doubt, the one that will mark the beginning of his second period in front of the issuing instructor.

US inflation is at its highest level in three decades, and there is an active debate about whether the withdrawal of the monetary stimulus created to combat COVID should be faster than designed by the Fed. Powell's policy has been focused on defending that

and is due to the bottlenecks created in the world economy by the cessation of activity caused by the pandemic.

The big question, however, is whether economic agents are going to incorporate inflation into their expectations, thereby providing feedback.

According to the criteria of The Trust Project

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