Biden appoints Fed’s Lael Brainard as his top economic adviser

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By Yasin Ebrahim

Investing.com -- President Joe Biden on Tuesday named Federal Reserve Vice Chair Lael Brainard as the new director of his National Economic Council, leaving a dovish void at the Fed just as the war on inflation looks to drag on for some time. 

In her new role as White House top economic adviser, Brainard, who replaces outgoing NEC Director Brian Deese, is expected to work closely with Treasury Secretary Janet Yellen to help deliver President Biden's economic agenda as he reportedly has his sights set on reelection. 

"Lael, one of the country’s leading macroeconomists, brings an extraordinary depth of domestic and international economic expertise, having previously served at CEA, NEC, the Treasury Department and the Federal Reserve," President Biden said in a statement.

As part of the shake-up of his economic team, Biden nominated Jared Bernstein as chair of the White House Council of Economic Advisers, succeeding Cecilia Rouse. 

The departure of the Fed vice chair leaves the U.S. central bank searching for a vice chair less than a year after she was confirmed by the Senate in April.

In her time at the Fed, Brainard has been part of the Fed's rate-setting committee that voted to lift rates at the fastest pace since the 1980s. 

In the weeks leading to her much-speculated departure, Brainard emerged as one of the more vocal voices among Fed members pushing back against fears that wages could spiral out of control, causing inflation expectations to become unanchored.

Tentative indications of some deceleration in wages and "the scope for margin compression," Brainard said in a January speech, provided some "reassurance that we are not currently experiencing a 1970s‑style wage–price spiral." 

The focus on margin compression as an ally in the battle to dent labor demand, keeping wages pressures in check, was praised by some economists.

"No other FOMC member, as far as we know, has even uttered the word 'margin' in their discussion of the inflation story, an omission which we find both baffling and alarming," Pantheon Macroeconomics said in a note. 

While it isn't yet clear who Biden will nominate to fill the Fed vice chair seat, some speculate that it isn't likely that a hawk will fill the dovish void left by Brainard.

"At this point we have no clear idea who that will be, or how long the process will take, though we would hazard a guess that the president will not be looking to appoint a hawk," Pantheon Macroeconomics added.