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Central banking is on the radar again as Lael Brainard leaves the No. 2 role at the Federal Reserve to head up the National Economic Council. In her new position, she’ll coordinate economic policymaking across the executive branch amid a battle over the debt ceiling, and possibly an even bigger role in the near future. She was already passed over once to become Fed Chair following high-stakes interviews at the White House, and the new move could put her within reach of becoming a future Treasury Secretary as she builds rapport within the Biden administration’s inner circle.
Monetary policy going forward: Brainard was known as one of the most “dovish” members of the Federal Open Market Committee, urging a somewhat less aggressive approach in the fight against inflation. She has advocated for slowing the pace and intensity of rate rikes, providing a counterweight to the spectrum of policy, especially when compared to FOMC “hawks” like Minneapolis Fed President Neel Kashkari and Governor Christopher Waller. While President Biden could nominate a new Fed Vice Chair with a similar outlook, it may not be as easy for the appointee to forge policy consensus through persuasion compared to the institutional respect Brainard received by serving on the Fed’s board since 2014 (she also chaired four out of the eight subcommittees on the Fed’s Board of Governors).
“Lael has brought formidable talent and superb results to everything she has done at the Federal Reserve,” Chair Jay Powell said in a statement. “That lengthy list includes her thought leadership on monetary policy and economic research, her stewardship of financial stability and the payments system, strengthening the financial system both domestically and globally, and helping to manage the immense operational agency challenges during the pandemic. My colleagues and I will truly miss her.”
Go deeper: Brainard was a big force behind big bank oversight and regulation, and has discussed addressing climate change through the Fed’s financial stability mission. In terms of the economy, SA Marketplace author From Growth to Value has pointed to Brainard’s views in a recent article about market direction for 2023, referencing her view that despite a constrained labor supply, wages do not appear to be driving inflation in a 1970s-style wage–price spiral. Brainard will also not be the only one reshaping Biden’s U.S. economic policy, with longtime confidant Jared Bernstein appointed to head the Council of Economic Advisors.
