Biden's wise Fed choice

By choosing continuity, Mr Biden accomplished several things at once

- KENNETH ROGOFF

Give US President Joe Biden, a Democrat, credit for reappointing Jerome Powell, a Republican, to a second four-year term as chair of the United States Federal Reserve. In doing so, Mr Biden passed up a very strong alternative in Lael Brainard, the candidate much preferred by progressives, and who in the abstract would also have been an excellent choice. Firmly resisting strong pressure from the left wing of the Democratic Party, Mr Biden accomplished several things at once.

First, and most important, he reaffirmed the central bank's independence from political pressures. His predecessor, Donald Trump, inherited a very capable central bank head, Janet Yellen, and he acknowledged as much. But he decided that it was preferable to have his own person in charge, perhaps hoping that he could call on Mr Powell not to tighten monetary policy in the run-up to the 2020 election.

As with many of Mr Trump's decisions, this was a sharp break with tradition. New presidents typically reappoint a competent Federal Reserve chair to serve a second term. Mr Biden's choice resets the tradition. In the unlikely event Mr Trump were to become president again in 2025, would he feel the need to pass over Mr Powell for a third term because Mr Biden had endorsed him? Probably.

In reappointing Mr Powell, Mr Biden also took an important step toward establishing his own independence, in particular from his party's strident left a wing, which until now has exerted enormous s influence. Mr Biden tacked hard toward the centre, basing his choice almost entirely on competence and picked a candidate whom many Republicans i - also endorsed.