White House Considers Two Key Nominations at the Fed
WASHINGTON — President Biden is closing in on two nominations for the Federal Reserve’s Board of Governors that would give the Fed its first Latina board member and its second ever Black vice chair, according to several people familiar with the process.
Mr. Biden is close to nominating Adriana Kugler, an economist with Colombian heritage who is the U.S. executive director of the World Bank, to the Fed’s only remaining open governor position. In a corresponding move, he is likely to elevate Philip Jefferson, an economist who was confirmed overwhelmingly to the board when Mr. Biden nominated him to an open governor position, to be the board’s vice chair.
The decisions are not yet final.
A White House spokesman declined to comment on Monday. The Federal Reserve did not comment.
If she is both nominated and confirmed by the Senate, Ms. Kugler would fill a governor position recently vacated by Lael Brainard, who became director of the White House National Economic Council in February.
The Fed board is made up of seven members, with one serving as chair, another as vice chair and another as vice chair for bank supervision. Ms. Brainard was both a governor and the Fed’s vice chair.
The leadership shuffle at the Fed — the world’s most powerful central bank and a key economic policy setter in America — would reflect the complicated set of priorities that the Biden administration is trying to balance. The administration is under pressure, especially from Senator Bob Menendez of New Jersey, to appoint a Latino or Latina to the Fed Board.
Ms. Kugler, who was formerly both an economist and administrator at Georgetown University, was not on the list of potential candidates that Mr. Menendez, a Democrat, put forth. But a spokesperson for Mr. Menendez said, without commenting on specific candidates, that the senator’s priority was elevating a qualified Latino or Latina to the Fed Board — whomever that person might be.
A Latino person has never served on the Fed Board of Governors in the central bank’s more than 109-year history, so Ms. Kugler’s nomination would be a historical first if it ended in a successful confirmation.
The Fed is also approaching a challenging policy juncture as it slows the economy to contain inflation. The vice chair at the central bank traditionally plays a key role both in communicating what the Fed is doing and in helping the chair, in this case Jerome H. Powell, to rally a policy consensus. That could call for someone with experience at the central bank. The job is likely to be a difficult one as the Fed slows the economy, weakens the job market and draws ire from both progressive Democrats and — if history is any guide — potentially the broader public.
Mr. Jefferson, who took office at the Fed last May, is an economist who most recently served as an administrator at Davidson College and who has a doctorate in economics from the University of Virginia. During his tenure at the Fed, he has built up a reputation for being an inquisitive listener with an interest in staff economic research, according to a person familiar with his time there.
Ms. Kugler would bring with her extensive knowledge of the labor market. She was formerly chief economist of the Labor Department during the Obama administration, serving in that job from 2011 to 2013. She has worked in the economics departments at the University of Houston and at University Pompeu Fabra in Barcelona, and she has a doctorate from the University of California, Berkeley.
Another open job within the Fed’s leadership ranks could also be filled soon: The president of the Federal Reserve Bank of Kansas City.
While the White House nominates leaders to the Fed’s public Board of Governors, the central bank’s 12 regional reserve banks across the country are semiprivate, and their leaders are selected by community members and business leaders on their boards.
Phillip Swagel, the director of the Congressional Budget Office, is on the list of potential candidates for that position, according to a person familiar with the matter. The Congressional Budget Office did not comment on Mr. Swagel’s candidacy, nor did the Kansas City Fed.
If he is picked and approved by the Fed’s Board of Governors, Mr. Swagel would vote on monetary policy in 2025. While governors at the Fed and the head of the New York branch hold constant votes on monetary policy, other regional bank presidents rotate in and out of voting seats.
The Fed meets this week to decide on whether to raise interest rates at a moment when the banking system is experiencing tumult — the government announced that First Republic was being acquired by J.P. Morgan in the early hours of Monday — but inflation is also proving stubborn.
Central bankers are expected to raise rates by a quarter point, but then to leave them unchanged at just above 5 percent in the coming months as the economy slows and unemployment rises.
The economic moment makes the Fed nominations unusually high stakes: Whoever fills the open positions at the Fed could provide an important voice at the table as officials debate how to strike the delicate balance between controlling inflation and harming the labor market.
While economists broadly agree that some economic pain may be necessary to get price increases back under control, how much — and how rapidly inflation must be wrestled back — will require difficult choices.
“The challenges that this Fed faces are so different than at any point in the last 40 years,” said Blerina Uruci, chief U.S. economist at T. Rowe Price. “How do they safety land this economy into an equilibrium where inflation is not sticky, and where we’re not creating too much unemployment?”