Joe Biden names Fed’s Lael Brainard as top economic adviser

President Joe Biden has named Lael Brainard, vice-chair of the US Federal Reserve, as his top economic adviser, bringing the central bank’s second-in-command to the White House to serve as one of Washington’s top financial policymakers.

As the next director of the National Economic Council, the main White House job co-ordinating economic policy across the government, Brainard will replace Brian Deese, who is departing the Biden administration after serving in the role for more than two years.

Brainard’s departure marks a rather abrupt exit from the US central bank’s leadership for the former Treasury under-secretary for international affairs. Although she has been on the board of governors at the Fed since 2014, she has only been vice-chair since May 2022.

Brainard’s move is part of a broader shake-up of Biden’s economic team in the wake of November’s midterm elections. The overhaul also involved the elevation of Jared Bernstein to the chair of the White House council of economic advisers, taking over from Cecilia Rouse. Janet Yellen, Treasury secretary, is expected to remain in her post.

“Lael, one of the country’s leading macroeconomists, brings an extraordinary depth of domestic and international economic expertise,” Biden said about Brainard, citing her career at the White House under Bill Clinton, at the Treasury under Barack Obama, and then the US central bank. “She is a trusted veteran across our economic institutions, and understands how the economy affects everyday people.”

In her years at the Fed, Brainard has been known for her dovish approach to monetary policy and her tougher stance on financial regulation, supporting more rigorous capital requirements for banks.

In a speech at the University of Chicago’s business school last month, Brainard said “inflation remains high” and policy “will need to be sufficiently restrictive for some time” to get it down to the Fed’s 2 per cent target.

But she also expressed some confidence that the US might secure a “soft landing”, avoiding a recession — a view shared by the White House.

“It remains possible that a continued moderation in aggregate demand could facilitate continued easing in the labour market and reduction in inflation without a significant loss of employment,” she said.

Brainard has long been considered one of the most talented economic policymakers of her generation within the Democratic party. She had been considered a contender for Treasury secretary before Yellen was chosen and for chair of the US central bank before Biden decided to nominate Jay Powell to a second term.

Progressive Democrats have been sceptical of Brainard in the past, particularly because she was seen as sympathetic to more open trade and engagement with China while she worked at the Treasury department under former president Barack Obama. However, they have largely supported her approach at the Fed.

Brainard’s appointment comes at a political inflection point within the White House. With Republicans in control of the House of Representatives, Biden’s expansive economic legislative agenda is expected to grind to a halt.

But Brainard will be in charge of managing the White House’s response to expected fiscal brinkmanship congressional Republicans over the debt ceiling, and may have to help negotiate an agreement with Congress to avoid a default on US debt.

Brainard’s move to the White House opens up a key vacancy for Biden to fill at the Fed, at a time when it is still battling inflation and raising interest rates to bring consumer price gains closer to its 2 per cent target.

Biden made other changes as well on Tuesday. Bharat Ramamurti, the deputy director of the NEC, will serve as “adviser for strategic economic communications”, while Heather Boushey, a member of the CEA, will serve as chief economist of the “Invest in America” cabinet. Joelle Gamble, the chief economist at the labour department, will become deputy director of the NEC.