Yellen backs Powell for second term as Federal Reserve chair

US Treasury Secretary's endorsement is thought to have given a powerful boost to Jerome Powell

Janet Yellen's backing of Jerome Powell to continue in his role as Fed chairman sends out a soothing signal of continuity as the US economy recovers from the pandemic.  

US Treasury Secretary Janet Yellen is understood to have told senior White House advisers that she supports reappointing Jerome Powell as Federal Reserve chair, a move that greatly increases his chance for a second term.

US president Joe Biden hasn’t made a decision yet and is likely to make his choice around Labor Day, early next month.

Keeping someone viewed by Wall Street as a trusted policymaker in charge of the world’s most powerful central bank would send a signal of continuity as the economy recovers from the pandemic.

With Mr Powell’s four-year term ending in February, the White House has been casting a wide net for possible candidates.

Covid uncertainty may trigger caution 

Advisers have been examining the public speeches and comments of potential contenders to consider, paying special attention to views on the labour market.

However, uncertainty over the economic impact of a surge in coronavirus cases fuelled by the delta variant may trigger more caution about changing the leadership at the Fed.

Ms Yellen’s backing gives Mr Powell an enormous boost: Her almost two decades of experience at the Fed, including four years at its helm, make her counsel to Mr Biden valuable.

She also has experience working directly with Mr Powell, who served as a governor at the Fed from 2012 until being elevated to the chair in 2018 when then US president Donald Trump passed over Ms Yellen for her own second term.

Timeline for end of stimulus measures

Meanwhile, Mr Powell is expected to hint at prospects for an eventual reduction of US monetary stimulus when he gives a long-awaited speech on Friday for the Fed’s annual Jackson Hole symposium.

The Fed is currently buying about $120bn (€102bn) of assets per month — $80bn of Treasury securities and $40bn of mortgage-backed debt — and has pledged to keep up that pace until “substantial further progress” has been made toward its goals of maximum employment and 2% inflation.

The Jackson Hole event is traditionally scrutinised for hints on upcoming changes in stance.

Some Fed leaders have used it as a platform to explain new initiatives, as Mr Powell did last year in unveiling a new monetary policy framework.

• Bloomberg