What to Know in Washington: Progressives Eye Biden Open Fed Slot

President Joe Biden’s choice for Federal Reserve vice chair will signal where he stands on combating inflation — and whether he agrees with restive progressives worried that the central bank’s rate increases will lead to job losses and recession.

It’s a familiar dilemma for the president, who has had to choose between pleasing progressives and getting broader bipartisan backing in his past Fed picks. This time, however, the political stakes are higher as Biden prepares to mount an expected reelection bid where the economy and persistent inflation will be a central issue.

Photographer: FREDERIC J. BROWN/AFP

For Biden’s first round of Fed picks, progressives pushed for nominees who would transform the central bank on regulatory policy, including a focus on the financial risks of climate change. But the economy has shifted since then, and the left is focused squarely on monetary policy as Biden seeks to fill the opening created when he tapped Lael Brainard last month to be his chief economic adviser.

Sen. Elizabeth Warren (D-Mass.) wants Biden to select a vice chair to counter Chair Jerome Powell, who she says “has made clear that he will take extreme steps on interest rates and he’s willing to put millions of people out of work.”

Since inflation hit 40-year highs last year, Powell and his team have raised rates rapidly from zero to a range of 4.5% to 4.75%, including four jumbo 0.75 percentage point increases. Recently, he’s asserted that the booming labor market needs “some softening” if the Fed is to tamp down inflation — a stance progressives view as dangerous and unnecessary.

“If the Fed keeps pushing these extreme interest rate hikes, they can tip this whole economy off an economic cliff,” Warren, who opposed Powell’s renomination in November 2021, warned this week.

But Powell, who will testify before Congress next week, continues to enjoy support from Republicans and moderate Democrats. Democrats have a one-seat majority in the Senate, so Biden either must keep most of the party together or select a nominee who can appeal to Republicans, as he did with Powell’s own renomination. Steven T. Dennis previews Biden’s choice.

Happening on the Hill

CONGRESS’ SCHEDULE:

• Senators convene at 10 a.m. for votes on judicial nominees.
• The House returns for votes Tuesday.

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Elections, Politics & Probes

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Around the Administration

BIDEN’S AGENDA:

• Biden meets with Senate Democrats for a 1 p.m. caucus lunch at the Capitol.
• Press Secretary Karine Jean-Pierre holds a briefing at 2:30 p.m.

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White House Adds Environmental Justice Staff for Equity Agenda

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To contact the reporter on this story: Brandon Lee in Washington at blee@bgov.com

To contact the editor responsible for this story: Giuseppe Macri at gmacri@bgov.com