Instead, market observers are increasingly concerned about the lack of clarity on the Fed’s future leadership. The central bank will enter 2022 with a difficult twin challenge: sluggish growth coupled with a worrisome rate of inflation. Combat rising prices too aggressively and Fed officials risk smothering the slow recovery. Neglect inflation, and they risk doing too little as people spend more of their money immediately, before its value erodes, fueling an inflationary spiral. The Fed announced Wednesday that it is beginning the delicate process of tapering the extraordinary bond-buying program it introduced during the pandemic downturn. There should be no more uncertainty about who will navigate these tough circumstances. Moreover, Mr. Biden would underscore the Fed’s political independence, which is absolutely indispensable, by renominating Mr. Powell, a Republican appointee.
Mr. Biden may simply prefer to announce Mr. Powell’s renomination along with his picks for several other senior Fed jobs. Preparing all of his chosen candidates might be taking time. But in the meantime, Sen. Elizabeth Warren (D-Mass.) and other critics are waging an overwrought campaign against Mr. Powell. Ms. Warren declared in a recent hearing that Mr. Powell’s views on bank regulation, which do not entirely mirror hers, make him “a dangerous man.”
Against that, former senator Christopher J. Dodd (D-Conn.) and former congressman Barney Frank (D-Mass.), who drafted the bank regulation bill Mr. Powell is implementing, wrote in September that “nothing in Powell’s performance contradicts his assertion that he supports the basic framework we put in place.” Treasury Secretary Janet L. Yellen asserted late last month that “regulation of financial institutions has been markedly strengthened” under his watch. Prominent Democratic economist Alan S. Blinder declared that Mr. Powell has done a “superb” job.
Mr. Blinder pointed out that Mr. Biden has a painless way of responding to Ms. Warren without politicizing the Fed: renominate Mr. Powell while appointing someone who is more pro-regulation to become the central bank’s vice chair of supervision, the official who directly oversees banking. Powell skeptics’ preferred candidate for the Fed’s top job, Fed governor Lael Brainard, would be a strong choice for the vice-chair post.
Mr. Powell’s renomination would protect the Fed’s independence, but the Fed chair also richly deserves another term on his own merits. The president should stop delaying and say so.