The Senate on Thursday overwhelmingly confirmed Jerome Powell for a second term as Federal Reserve chairman, a move that comes at a precarious time for the U.S. central bank as policymakers try to rein in the worst inflation. high for a generation without tipping the economy into a recession. .

The Senate voted 80 to 19.

The vote means Powell will remain at the helm of the world’s most powerful central bank for another four years and signals lawmakers’ underlying confidence in the Fed’s aggressive monetary policy tightening as it races to catch up. spiraling inflation.

FED SHOULD RAISE RATES 7 TIMES THIS YEAR TO FIGHT INFLATION, SAYS BOFA

A Republican, Powell was first nominated in 2017 by then-President Donald Trump and was nominated for a second term by President Biden in November.

Choosing who to tap is one of the most important economic decisions Biden has made in his first year in the Oval Office, especially as the White House seeks to quell growing voter unrest over the state of the US economy amid soaring prices for everything from meat to gasoline to clothing.

“I am confident that President Powell’s and Dr. Brainard’s focus on keeping inflation low, price stability and achieving full employment will make our economy stronger than ever,” said Biden in a statement at the time. “Together, they also share my deep belief that urgent action is needed to address the economic risks posed by climate change and stay ahead of emerging risks in our financial system.”

Powell, 69, won widespread acclaim on Capitol Hill during the coronavirus pandemic for the swift and unprecedented action the Fed took to prevent a full-scale financial crisis and won the support of most Democrats and republicans.

The Fed chair – one of Washington’s most powerful players, able to dictate the pace of economic growth – is usually nominated and confirmed for a second term, often to reinforce the central bank’s independence from the central bank. -vis the policy. Powell’s four-year term ended in early February (he was designated “president pro tempore” until the Senate votes).

The confirmation comes as the Fed intensifies its fight against inflation with a series of measures intended to curb consumer demand: policymakers voted last week to raise rates by 50 basis points for the first time in two decades and announced they would begin trimming the massive $9 trillion balance sheet, which nearly doubled in size during the pandemic.

Federal Reserve Chairman Jerome Powell arrives to speak at a news conference following the meeting of the Federal Open Market Committee, Wednesday, Dec. 11, 2019, in Washington. ((AP Photo/Jacquelyn Martin)/AP Newsroom)

Collectively, these measures mark the most aggressive monetary policy tightening in decades as the Fed tries to tackle inflation, which jumped to 8.3% in April – a figure much higher than expected and close to expected. a high of 40 years.

Powell all but promised that similarly sized, half-point rate hikes would be on the table at upcoming policymaking meetings.

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“Inflation is way too high, and we understand the hardship it is causing, and we are moving quickly to bring it down,” Powell told reporters last week. “Assuming that economic and financial conditions evolve in line with expectations, there is a general feeling within the committee that additional increases of 50 basis points should be on the table at the next two meetings.”

The bigger question now is whether central bank officials can successfully control inflation and stabilize prices without triggering an economic recession. Increasing the federal funds rate tends to create higher rates on consumer and business loans, which slows the economy by forcing them to cut back on spending.

The Fed’s hawkish pivot has heightened fears on Wall Street that a slowdown is on the horizon, with Fannie Mae, Bank of America and Deutsche Bank all predicting a recession within the next two years.

Powell argued that the labor market and consumer demand are strong enough to prevent a downturn.

“It’s a strong economy,” he said. “Nothing about it suggests it is near or vulnerable to a recession.”