The Biden Era... The Fed's Role Grows Larger

The Central Bank as a Focal Point for Supporting Labor Market and Economic Recovery... Possibility of Workforce Expansion

[Image source=AP Yonhap News]

[Asia Economy Reporter Seulgina Jo] With the inauguration of the Joe Biden administration, the role of the U.S. central bank, the Federal Reserve (Fed), is expected to grow. This is because the Fed is being recognized as a key player in supporting labor market and economic recovery. Unlike former President Donald Trump, who frequently criticized the Fed's actions, Biden, the Democratic candidate, has consistently emphasized the Fed's independence, which further supports this expectation.

According to major foreign media such as The Wall Street Journal (WSJ) on the 5th (local time), the Biden camp is focusing on people of color with experience working at the White House and the Fed to maximize the synergy between fiscal and monetary policies in the upcoming COVID-19 response and economic stimulus efforts. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, and Mary Daly, President of the San Francisco Fed, are representative figures.

The WSJ reported, "The Fed will play a key role in supporting labor market and economic recovery," adding, "New personnel may be introduced to the Fed." Bloomberg also reported, "The important institution is not the White House but the Fed," and "Biden, who has no Fed background, will likely respect its independence." Some media outlets have also predicted that the Biden administration will increase Fed personnel.

The political turmoil surrounding the U.S. presidential election also strengthens the Fed's future role. Even if Biden wins, if the Republicans control the Senate, large-scale administration-led economic stimulus measures are bound to face obstacles. This will inevitably place a greater burden on the Fed's monetary policy, which shares the challenges of labor market, economic recovery, and price stability. Ultimately, there are growing expectations that the Fed will take the lead in economic stimulus by maintaining zero interest rates for an extended period and expanding government bond purchases.

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed)
[Photo by AP]

Fed Chair Jerome Powell has also emphasized the need for additional stimulus through monetary and fiscal policies. At the Federal Open Market Committee (FOMC) meeting held over two days until this day, the Fed decided to keep the benchmark interest rate at the current zero level and continue its large-scale quantitative easing policy. When asked whether the Fed's economic stimulus tools had been exhausted, Chair Powell replied, "No," adding, "We have not run out of bullets." This suggests that active Fed measures for COVID-19 response and economic stimulus can be expected after the election.

The WSJ reported in another article the day before, "The Fed's shoulders have grown heavier," and "The political turmoil surrounding the election will place more responsibility on Chair Powell." On this day, market evaluations suggested that expectations for an expanded Fed role contributed to stock price increases. Michael LoRegio, a trader at Manulife Investment Management, mentioned, "If the scale of the stimulus package is reduced, the Fed will have no choice but to maintain zero interest rates for a long time." Biden also prefers low interest rates that can ensure continuity of fiscal expansion policies.

This content was produced with the assistance of AI translation services.