Lael Brainard’s replacement had better be dovish. That’s the sentiment of progressive Democrats on replacing her at the Federal Reserve.
They have been disappointed in Brainard, who was widely viewed as a dove when she was named Fed vice chair in November 2021. But once the central bank began raising interest rates to combat swelling inflation, Brainard proved to be a reliable public ally of the strategy and its chief proponent, Fed Chair Jerome Powell.
Now Brainard’s job is vacant—she just took over as head of the National Economic Council—and progressive Democrats want an unwavering dove to replace her. President Joe Biden is weighing who to nominate next.
The nominee, said Senator Elizabeth Warren, D-Massachusetts, in remarks to reporters, must be someone who can offset Powell’s rate-hike campaign.
“If the Fed keeps pushing these extreme interest rate hikes, they can tip this whole economy off an economic cliff,” the senator said, according to Bloomberg.
Senator Bernie Sanders, I-Vermont, a fellow icon of the left, has echoed her remarks. Robert Kuttner, co-founder of The American Prospect, a liberal periodical, wrote: “Appointment of a dissenter would usefully break the Fed norm of iron consensus, and maybe even free the economy from a needless recession.”
Names floated in the press as Brainard’s potential replacement include two economics professors—Karen Dynan of Harvard and Janice Eberly of Northwestern—plus San Francisco Fed President Mary Daly and Chicago Fed President Austan Goolsbee. Dynan and Goolsbee are considered more hawkish, and Eberly and Daly more dovish.
What’s the reaction to the left’s wishes on this issue from the person who has a big say in the outcome, the Senate Banking Committee chief? Muted, but somewhat sympathetic to the Warren bunch.
Senator Sherrod Brown, D-Ohio, whose panel will consider the Fed nominee, evoked the Fed’s twin mandates—to control inflation and maximize employment—in his response. In a nod to Warren and her allies, he told Bloomberg that he seeks “a real emphasis on the dual mandate, not just the single emphasis on interest rates, inflation,” and that he wants “diversity of thought.”
In a Senate where fellow Democrats have a one-seat majority, Biden likely must consider the preferences of Republicans and centrist Democrats. That was his tack in 2021, when he re-appointed Powell, a Republican, as chair. (President Donald Trump tapped Powell for his first term.)
The dynamics since 2021 have changed, however. Powell’s second-term nomination came before the Fed embarked on its anti-inflation push. Now, rate increases have become one of many political flashpoints.