Biden May Reshape Fed with Pro-Democratic Figures
Powell's Reappointment Obstacle Removed as Progressive Critics Resign
[Asia Economy New York=Correspondent Baek Jong-min] Randall Quarles, Vice Chairman of the U.S. Federal Reserve (Fed), announced his resignation within the year. This is analyzed as a factor that removes obstacles for President Joe Biden to decide on the reappointment of Fed Chair Jerome Powell.
On the 8th (local time), Vice Chairman Quarles sent a resignation letter to President Biden, indicating that he would step down from his position as a Fed board member by December.
Vice Chairman Quarles was appointed in 2017 by former President Donald Trump as the first Vice Chairman for bank supervision under the Dodd-Frank Act, which was introduced to strengthen financial oversight. Under his leadership, the Fed moved towards easing financial regulations rather than tightening them. Because of this, progressive Democrats have regarded Quarles as a "thorn in their side" and have attacked him.
With Quarles' resignation, it is also analyzed that the restructuring of the Fed's governance has effectively begun. The Fed Board of Governors consists of seven members. One seat is currently vacant, and with Quarles' departure and the expiration of Vice Chairman Richard Clarida's term in January next year, three seats will be vacant. Chair Powell's term also ends in February next year. President Biden now has the opportunity to fill these vacancies with progressive-leaning figures and reorganize the Fed with a Democratic orientation.
The key issue in this Fed personnel change is undoubtedly whether Chair Powell will be reappointed. The Wall Street Journal evaluated that Vice Chairman Quarles' resignation removed obstacles for President Biden to decide on Powell's reappointment.
President Biden announced last week that he would soon decide on the Fed Chair. Treasury Secretary Janet Yellen also praised Powell for his excellent performance, increasing the likelihood of his reappointment. If President Biden chooses to reappoint Chair Powell, the prevailing opinion is that Lael Brainard, favored by progressives, will take the position of Fed Vice Chair.
If a left-leaning Fed official is appointed, the timetable for raising the benchmark interest rate could also change. On this day, Fed Vice Chairman Clarida forecasted that the conditions necessary for a rate hike would be met by the end of next year, stating, "It is clearly still a long way off before considering a rate increase."
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