The Senate confirmed Jerome Powell to become the 16th chairman of the Federal Reserve, clearing the way for a new leader likely to continue raising interest rates to keep the economic expansion on track.
Mr. Powell, who was confirmed Tuesday by an 85-12 vote, will take over when Chairwoman Janet Yellen's four-year term as chief ends Feb. 3. She has said she would leave the Fed board of governors once her successor is sworn in.
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Although Mr. Powell's nomination attracted broad bipartisan support, it also drew opposition from several potential contenders in the 2020 presidential race. On the Democratic side, those voting against his confirmation included Sens. Elizabeth Warren of Massachusetts, Kamala Harris of California and Cory Booker of New Jersey. On the Republican side, Sens. Ted Cruz of Texas, Rand Paul of Kentucky, Mike Lee of Utah and Marco Rubio of Florida voted no. Independent Sen. Bernie Sanders of Vermont also opposed the nomination.
Mr. Powell, a Fed governor since 2012, will inherit an economy on the upswing fueled by a booming labor market and strong global growth. His task will be to sustain the economy's expansion without letting it pick up so much momentum that the Fed would be forced to cool it off with sharp rate increases, risking a downturn.
The Fed has been gradually raising short-term interest rates since late 2015 and last year started shrinking its portfolio of assets purchased to bolster the economy during and after the financial crisis.
Officials in December raised the Fed's benchmark rate by a quarter percentage point to a range between 1.25% and 1.5% and penciled in three more such moves this year.
Mr. Powell is likely to stick with Ms. Yellen's cautious and gradual approach to raising rates.
"We've been patient in removing accommodation, and I think that patience has served us well," Mr. Powell said during his confirmation hearing Nov. 28, after being nominated by President Donald Trump on Nov. 2. Now that growth has picked up, "it's time for us to be normalizing interest rates," he added.
But those plans could change depending on how the economy evolves.
If inflation remains stuck below the Fed's 2% target, Mr. Powell and his colleagues could decide to hold off on rate increases to let price pressures build. Or if the economy shows signs of overheating, they might want to move more aggressively.
A spurt of growth driven by the tax overhaul could lead the Fed to raise rates more quickly to cool off the economy. That could place Mr. Powell at odds with the White House, which would welcome a stronger expansion.
"We can afford to go more slowly if we determine that inflation is going to perform lower than we thought and we can move more quickly," Mr. Powell said in November.
Mr. Powell, a lawyer and former private-equity partner, moves into his new role with less formal training in economics and monetary policy than many of his predecessors. He will be the first Fed chairman in three decades who doesn't have a Ph.D. in economics.
Before joining the Fed, Mr. Powell was a visiting scholar at the Bipartisan Policy Center in Washington. He also served as a top Treasury Department official responsible for domestic finance in the George H.W. Bush administration.
Mr. Powell is the second of Mr. Trump's Fed nominees to be confirmed, following Randal Quarles, who joined the central bank in October as vice chairman for supervision.
But Mr. Powell still will have to contend with a depleted Fed board: The seven-member panel has three vacancies.
Mr. Trump has nominated Marvin Goodfriend, a Carnegie Mellon University professor and former Fed economist, to fill one of those positions. The Senate Banking Committee held his confirmation hearing Tuesday.
Another board seat will open up once Ms. Yellen steps down from the board of governors.
Write to David Harrison at email@example.com
(END) Dow Jones Newswires
January 23, 2018 18:34 ET (23:34 GMT)
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