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The decisions could ripple across policymaking at the White House and the Fed.
Ms. Brainard is seen as the most liberal top official at the central bank and a potential brake on the Fed’s ongoing campaign to raise interest rates to tame inflation. Raising interest rates cools down consumer and business demand, slowing the labor market in an effort to restrain rapid inflation. Ms. Brainard has at times been more focused on keeping the job market strong, a position that Wall Street typically calls “dovish.”
“I think this should cause you to upgrade your expectations for interest rates a little bit — Lael Brainard was on the dovish end of the spectrum, and very respected,” said Jason Furman, an economist at Harvard University and a former Obama administration economic adviser. “One potential voice for restraint is going to be absent.”
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Ms. Brainard, 61, has been vice chair at the Fed since May 2022 and was a governor at the central bank’s board in Washington starting in 2014. Before that, she had been an official at the Treasury and had worked in the Clinton White House.
Her supporters say that experience will help Mr. Biden and his new chief of staff, Jeffrey D. Zients, as they ramp up for Mr. Biden’s expected announcement that he will seek re-election in 2024. That work will including coordinating spending decisions, new regulations and other efforts to put into effect the sprawling industrial policy agenda that Mr. Biden has already signed into law.
Her departure would leave the Fed’s No. 2 position open at a challenging time for the central bank. Officials have been raising interest rates to try to rein in rapid inflation, and 2023 is the year when those adjustments are likely to begin to bite most fully, potentially causing unemployment to rise. Policymakers will need to decide how much pain they are willing to risk to be sure that inflation is truly moderating.
Whoever is appointed as the new vice chair would need to be confirmed by the Senate, which could push the White House toward nominating someone who can either attract broad bipartisan support or who would not face a challenge among Democrats.
And finding someone with Ms. Brainard’s skills could prove challenging.
“She will leave a hole,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “She was a leading voice on international economics, macroeconomics, on inequality, climate change — she spanned a lot of areas.”