Biden announces black and Latino candidates for top Federal Reserve spoits

President Joe Biden has nominated Philip Jefferson, a member of the Federal Reserve’s board of directors, as vice chairman of the board, the White House announced Friday.

Biden has also selected Adriana Kugler, an economist from Georgetown University, to join the Fed board. If confirmed by the Senate, she would become the first Hispanic American on the Fed’s interest rate committee and Jefferson, if confirmed, would become the second black man to serve as the Fed’s second official.

The central reserve board remains predominantly white, but the nominations of Jefferson and Kugler further transform the diversity of the bank’s leadership in just two years.

The nominations come as the Fed opens a new chapter in its battle against an increasingly fraught economy characterized by rising interest rates, still high inflation and a shaky banking system.

Since March 2022, the Fed has raised its benchmark rate ten times, to its highest level in 16 years, in an aggressive bid to cool price increases.

After a policy meeting last week, Chairman Jerome Powell indicated that the Fed may now pause its rate hikes.

Central bankers want policies tight enough to reduce inflation, which is now more than twice their target of 2%, but not so tight as to shrink a labor market that has so far weathered steeper borrowing costs with surprising strength. Finding that balance will be a difficult task.

In the coming months, the Fed faces tough decisions on whether to leave rates unchanged for the rest of this year or continue to raise them. Fed officials could also come under pressure to cut rates should a recession hit later this year, as many economists expect.

Jefferson, 61, who first joined the Fed board just a year ago, would replace Lael Brainard, who left in February to become Biden’s top economic adviser.

As Vice Chairman, Jefferson would join a circle of policymakers that included Powell and Federal Reserve Bank of New York President John Williams.

Kugler, 53, who has a background in international and labor economics, is on leave from Georgetown to serve as a United States representative on the World Bank board. During the Obama administration, she served as Chief Economist of the Labor Department from September 2011 to January 2013.

Biden also announced that he plans to re-nominate Lisa Cook for a full 14-year term on the Fed board. Cook, 58, who was narrowly confirmed by the Senate, joined the board last May to serve an unexpired term that expires January 31, 2024.

“These nominees understand that this is not a partisan job, but plays a critical role in pursuing maximum employment, maintaining price stability and overseeing many of our nation’s financial institutions,” Biden said in a statement.

Following the Fed’s policy meeting last week, Powell said that while inflation remains well above the Fed’s 2% target, banking sector turmoil could lead to tighter credit for businesses and households and weaken the economy. That could allow the Fed to end its rate hike campaign.

Biden’s choice of Kugler follows long-standing demands from Sen. Robert Menendez, a New Jersey Democrat, that a Latino be elected to the rate-setting committee for the first time in the Fed’s 109-year history. Menendez last year voted against Biden’s nomination of Powell for a second four-year term to protest the lack of Latino officials at the Fed.

In a statement, Menendez welcomed Kugler’s nomination.

“We are witnessing history unfold in real time,” he said.

Jefferson and Kugler have previously received Senate approval. Jefferson sailed through the Senate last May by a vote of 91 to 7. Kugler was confirmed unanimously in her position at the World Bank last April.

Both Jefferson and Kugler would vote on financial regulatory policy, an area that has gained more prominence following the collapse of three major banks, as well as interest rate decisions.

As Fed governor, Jefferson has voted for every rate hike the central bank has imposed since joining the central bank in May 2022. He also reiterated Powell’s concerns that unemployment will likely have to rise, at least modestly, to bring inflation back to the Fed’s 2% target.

Jefferson has also stressed the need to keep Americans’ inflationary expectations in check. Like many economists, Jefferson believes such expectations can fulfill themselves: If companies and workers expect high inflation to continue, both will try to offset rising costs by asking higher prices or demanding higher wages. Both trends could then fuel inflation further.

Given such concerns, some analysts view Jefferson as a bit “hawkish” in his policy views. Hawks usually favor higher interest rates to ward off inflation, while “doves” generally support lower rates to encourage hiring.

In recent remarks, Jefferson expressed confidence in the US banking system, saying data showing banks are tightening credit is consistent with the Fed’s efforts to slow down the economy. He added that inflation is declining and the “economy is beginning to slow down in an orderly manner.”

Cook has also supported the rapid pace of rate hikes since joining the board on the same day as Jefferson last year. But in late April, she gave an ambiguous view of the Fed’s next moves, pointing to a slowdown in bank lending as a reason why the Fed may need to impose fewer rate hikes to beat inflation.

However, if economic data points to “continued strength in the economy and slower disinflation, we may have more work to do,” Cook said.

Jefferson, who grew up in a working-class family in Washington, D.C., has focused his economic research on poverty and monetary policy, according to an interview with the American Economic Association. Prior to joining the Fed, he was an economist and administrator at Davidson College in North Carolina.

Adriana Kugler, if confirmed by the Senate, would become the first Hispanic American to sit on the central bank reserve

President Joe Biden is working for more diversity in the Federal Reserve board, which consists of a majority of whites

Kugler has done extensive research on employee training in the United States and Colombia. One of her recent papers studied the effects of extended U.S. unemployment benefits during two pre-pandemic recessions. Her research found that the extra support helped people take more time to find a job that matched their skills and qualifications, and their wages went up.

Kugler earned a Ph.D. in economics from the University of California, Berkeley. Jefferson received his doctorate in economics from the University of Virginia.

Cook, 58, the first black woman to sit on the Fed board, was approved by the Senate a year ago in a narrow 51-50 party-line vote. She was an economics professor at Michigan State University before joining the Fed and was a senior economist at the Council of Economic Advisers during the administration of President Barack Obama. She, too, voted in favor of the Fed’s continued rate hikes.

Meanwhile, Biden is deadlocked with Republicans over the debt limit that Treasury Secretary Janet Yellen says could give the government the money it needs to pay its bills as early as June 1.

Bankruptcy would plunge the economy into a recession it has so far avoided, analysts say, as well as doing long-term damage to the nation.