Fed chairman Jerome Powell has critics from both sides of US politics.Credit:AP
Powell is under pressure from both the “progressive” elements within the Democrats and the “hawks” within the Republican Party as well as elements of the business and financial markets communities.
For the progressives,he appears to be too keen to begin the tapering of the Fed’s $US120 billion ($162.3 billion) a month of bond and mortgages purchases soon but,more significantly,they argue he has been too soft on bank regulations and not aggressive enough in using the Fed’s authority and powers to promote action on climate change.
For the conservative critics,the Fed’sinsistence that a surge in inflation is “transitory” and its shift in policy from proactively acting against a threat of inflation to reactively responding once it is clearly entrenched risks an economic and markets disaster if it is proved wrong and has to slam on the brakes.
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The Fed has more than doubled its balance sheet since the pandemic emerged – it has bought about $US4.3 trillion of government and corporate bonds and mortgage securities – and they want to see those purchases tapered and,eventually,interest rates increased to avert that threat.
Biden has an opportunity to remake the Fed.
Powell’s term expires next February,the term of his vice-chairman (who’s also the key banking supervisor),Randal Quarles,ends next month and there is an open seat on the Fed’s board – the one Donald Trump desperately but unsuccessfully tried to fill in the immediate aftermath of the 2020 election.