cawacko
Well-known member
She was the leading dove at the Fed. As the article states, you can replace her with someone who shares her views but it doesn't necessarily mean the new person will have the same influence/sway as Brainard did. We'll find out in the coming months how hawkish Powell remains.
Lael Brainard’s Fed Departure Could Leave Immediate Imprint on Monetary Policy
Central bank’s No. 2 official has advocated for a marginally less aggressive approach to raising rates
President Biden’s reshuffle of his economic team could have its most immediate economic impact on the Federal Reserve, with the departure of the central bank’s vice chair, Lael Brainard, for the White House.
Ms. Brainard’s move to lead Mr. Biden’s National Economic Council means the Fed will lose an influential top official who has advocated for a marginally less aggressive approach to raising interest rates than Fed Chair Jerome Powell.
While she has publicly backed Mr. Powell in rapidly raising rates over the past year to fight inflation by slowing the economy, Ms. Brainard has at times emphasized different considerations in setting policy, including the risks of lifting rates more than necessary.
She had become one of the Fed’s most persuasive policy “doves,” officials who think high inflation is likely to slow as lingering pandemic reverse and who want to minimize potential job losses. By contrast, the central bank’s “hawks” more readily embrace stiffer measures to curb inflation.
At the margins, Ms. Brainard’s Fed exit raises the risk of a recession because it could lead the central bank to raise rates more aggressively this spring, said Derek Tang, an economist at the forecasting firm LH Meyer.
“If she had stayed, she would have been a coalescing force for a lot of the doves on the committee. She was the intellectual leader of that camp in terms of pushing back, potentially, against hiking in May and June,” Mr. Tang said. “The question is who is going to take on that mantle?”
Ms. Brainard said Tuesday she would resign her Fed post on or around Feb. 20.
The central bank raised rates by 4.5 percentage points over the past year, the most rapid adjustment since the early 1980s, after inflation hit 40-year highs last summer.
Fed officials are likely to raise rates at their meeting next month and debate how much higher they will need to lift them this year.
Since last fall, Ms. Brainard has laced her speeches with greater concern about the cumulative effects of Fed rate increases and optimism about the prospect that inflation might decline as the effects of the pandemic recede. She has also pointed to the potential for shrinking corporate profit margins, as opposed to reduced demand for workers, to bring down inflation.
Mr. Powell has argued that inflation could still remain uncomfortably high this year even though prices of goods are falling and housing costs are expected to rise more slowly this year. He has pointed to a narrower subset of labor-intensive services by looking at prices for services that exclude energy and housing, which he said offer the best gauge of higher wage costs passing through to consumer prices.
But in a speech last month, Ms. Brainard offered a more optimistic view by highlighting reasons the links between wages and prices for non-housing services might be weaker. She pointed to the prospect for price increases to moderate if they reflect the ripple effects of recent global dislocations that are now reversing—rather than of wage growth.
Some Fed officials have suggested they could pause rate rises soon and allow policy to tighten as inflation falls, which would lead inflation-adjusted rates to climb higher. But others have argued that they will keep raising rates until they see more evidence of an economic slowdown.
Some officials’ recent comments suggest the Fed’s current approach won’t be enough to reduce inflation, which could lead them to raise rates higher than otherwise, said Mr. Tang. “If the way you’re showing your resolve is to keep hiking, you’re going to overdo it,” he said.
Mr. Biden could nominate a new Fed vice chair with an outlook similar to Ms. Brainard’s. But inside the central bank’s rate-setting committee, policy consensus is forged through persuasion, and analysts said it could be difficult for a newcomer to quickly have the same influence as Ms. Brainard, an economist who served on the Fed’s board since 2014.
“You can’t drop a new person into this spot and think that they’re necessarily going to have the ear of the committee given that they lack the track record and institutional respect that Lael has,” said Tim Duy, chief U.S. economist at research firm SGH Macro Advisors. “I don’t think she’s going to be easy to replace.”
Over the past two decades, the vice chair has been an accomplished economist who can serve as a surrogate for the chair. Together with the New York Fed president, the vice chair serves as a member of the chair’s inner circle of policy advisers who shape the agenda for Fed’s policy meetings, which include up to 19 officials.
Among the candidates Mr. Biden could consider for the job are Fed governor Lisa Cook and Susan Collins, who last year became president of the Boston Fed. Other names mentioned by outside analysts include Harvard University economist Karen Dynan; Janice Eberly, a finance professor at Northwestern University; Nellie Liang, a former senior Fed official who is now undersecretary for domestic finance at the Treasury Department; Brian Sack, a former Fed economist who recently left hedge-fund firm D.E. Shaw & Co.,; and Seth Carpenter, chief global economist at Morgan Stanley.
Mr. Biden interviewed Ms. Brainard when he was considering candidates to lead the central bank at the end of 2021. He opted to reappoint Mr. Powell to a second four-year term and instead named Ms. Brainard to serve as the vice chair. She was confirmed by the Senate to that position last May.
Lael Brainard’s Fed Departure Could Leave Immediate Imprint on Monetary Policy
Central bank’s No. 2 official has advocated for a marginally less aggressive approach to raising rates
President Biden’s reshuffle of his economic team could have its most immediate economic impact on the Federal Reserve, with the departure of the central bank’s vice chair, Lael Brainard, for the White House.
Ms. Brainard’s move to lead Mr. Biden’s National Economic Council means the Fed will lose an influential top official who has advocated for a marginally less aggressive approach to raising interest rates than Fed Chair Jerome Powell.
While she has publicly backed Mr. Powell in rapidly raising rates over the past year to fight inflation by slowing the economy, Ms. Brainard has at times emphasized different considerations in setting policy, including the risks of lifting rates more than necessary.
She had become one of the Fed’s most persuasive policy “doves,” officials who think high inflation is likely to slow as lingering pandemic reverse and who want to minimize potential job losses. By contrast, the central bank’s “hawks” more readily embrace stiffer measures to curb inflation.
At the margins, Ms. Brainard’s Fed exit raises the risk of a recession because it could lead the central bank to raise rates more aggressively this spring, said Derek Tang, an economist at the forecasting firm LH Meyer.
“If she had stayed, she would have been a coalescing force for a lot of the doves on the committee. She was the intellectual leader of that camp in terms of pushing back, potentially, against hiking in May and June,” Mr. Tang said. “The question is who is going to take on that mantle?”
Ms. Brainard said Tuesday she would resign her Fed post on or around Feb. 20.
The central bank raised rates by 4.5 percentage points over the past year, the most rapid adjustment since the early 1980s, after inflation hit 40-year highs last summer.
Fed officials are likely to raise rates at their meeting next month and debate how much higher they will need to lift them this year.
Since last fall, Ms. Brainard has laced her speeches with greater concern about the cumulative effects of Fed rate increases and optimism about the prospect that inflation might decline as the effects of the pandemic recede. She has also pointed to the potential for shrinking corporate profit margins, as opposed to reduced demand for workers, to bring down inflation.
Mr. Powell has argued that inflation could still remain uncomfortably high this year even though prices of goods are falling and housing costs are expected to rise more slowly this year. He has pointed to a narrower subset of labor-intensive services by looking at prices for services that exclude energy and housing, which he said offer the best gauge of higher wage costs passing through to consumer prices.
But in a speech last month, Ms. Brainard offered a more optimistic view by highlighting reasons the links between wages and prices for non-housing services might be weaker. She pointed to the prospect for price increases to moderate if they reflect the ripple effects of recent global dislocations that are now reversing—rather than of wage growth.
Some Fed officials have suggested they could pause rate rises soon and allow policy to tighten as inflation falls, which would lead inflation-adjusted rates to climb higher. But others have argued that they will keep raising rates until they see more evidence of an economic slowdown.
Some officials’ recent comments suggest the Fed’s current approach won’t be enough to reduce inflation, which could lead them to raise rates higher than otherwise, said Mr. Tang. “If the way you’re showing your resolve is to keep hiking, you’re going to overdo it,” he said.
Mr. Biden could nominate a new Fed vice chair with an outlook similar to Ms. Brainard’s. But inside the central bank’s rate-setting committee, policy consensus is forged through persuasion, and analysts said it could be difficult for a newcomer to quickly have the same influence as Ms. Brainard, an economist who served on the Fed’s board since 2014.
“You can’t drop a new person into this spot and think that they’re necessarily going to have the ear of the committee given that they lack the track record and institutional respect that Lael has,” said Tim Duy, chief U.S. economist at research firm SGH Macro Advisors. “I don’t think she’s going to be easy to replace.”
Over the past two decades, the vice chair has been an accomplished economist who can serve as a surrogate for the chair. Together with the New York Fed president, the vice chair serves as a member of the chair’s inner circle of policy advisers who shape the agenda for Fed’s policy meetings, which include up to 19 officials.
Among the candidates Mr. Biden could consider for the job are Fed governor Lisa Cook and Susan Collins, who last year became president of the Boston Fed. Other names mentioned by outside analysts include Harvard University economist Karen Dynan; Janice Eberly, a finance professor at Northwestern University; Nellie Liang, a former senior Fed official who is now undersecretary for domestic finance at the Treasury Department; Brian Sack, a former Fed economist who recently left hedge-fund firm D.E. Shaw & Co.,; and Seth Carpenter, chief global economist at Morgan Stanley.
Mr. Biden interviewed Ms. Brainard when he was considering candidates to lead the central bank at the end of 2021. He opted to reappoint Mr. Powell to a second four-year term and instead named Ms. Brainard to serve as the vice chair. She was confirmed by the Senate to that position last May.
