Greg Valliere on Fed chair pick: President Biden 'has been wounded by inflation'

AGF Investments Chief U.S. Policy Strategist Greg Valliere joins Yahoo Finance to discuss President Biden's choice to renominate Fed Chair Jerome Powell, inflation, the economy, and more.

Video Transcript

BRIAN CHEUNG: Welcome back to Yahoo Finance Live. Again, still digesting that presser that just wrapped up with the president introducing his picks for the top jobs at Fed. Jay Powell at the top of the Fed as chief and Lael Brainard as the vice chairman role. Let's get a little bit more on this with Greg Valliere, AGF Investments chief US policy strategist.

And Greg, it finally happened. I don't have to leave my home without the terrifying thought of a Fed announcement just coming out of the blue. So we've got it all out of our system already. What's your initial thought about the announcement from the White House today about these picks at the top of the central bank?

GREG VALLIERE: Well, first of all, Brian, what took them so long? My lord, it took a long time. And, you know, I was told much earlier in the fall that Janet Yellen went to Joe Biden and said, Powell is your guy. You know, stick with him. The markets like him. Congress likes him.

But it still took Biden over two months to finally make the decision. You know, I have to think that maybe Biden has been wounded by inflation. His job approval numbers are way down. It looks like the Democrats may lose the House next fall. So maybe Biden was thinking, you know, this inflation issue has really hurt me. Maybe there's somebody else. And that may have been a factor in this taking so long.

BRIAN CHEUNG: Now, and Greg, that's an interesting point that you bring up. I want to ask about what happened alongside the decision or maybe lack of decision to wait this long, because a lot has happened in just the last few weeks. And even the kind of public discourse around inflation has really picked up over the last four weeks. So is it better or worse for the Biden administration that they didn't announce a pick, let's say, four to eight weeks ago?

GREG VALLIERE: Yeah, that could have been a factor as well. But, you know, the flip side of inflation, which is a serious political issue for Biden, the flip side is that the economy looks pretty strong right now. You look at last week's retail sales report was remarkably good. You look at unemployment data recently. I think this quarter, the fourth quarter could grow at 5%. I think the first and second quarters could average out to 3%, 3 and 1/2%, maybe a little better. So the economy has clearly picked up.

BRIAN CHEUNG: Now I want to ask about the political consequences of all of this because there is kind of this open question here about whether or not some of the choice to go with Powell here allows the Biden administration, if inflation doesn't end up getting tame, to put the blame on a Trump appointee, because it was Trump that put Powell in this position in 2018. Do you feel that's a relevant argument here? Because there's kind of a bit of an open question about how much the American populace generally cares about who's sitting at the Federal Reserve.

GREG VALLIERE: Yeah, that's a good point, Brian. But at the same time, I think that you've got to say, there is no template for dealing with a pandemic like the one we've been through, the greatest pandemic in 100 years. So a lot of this was done, sort of, it was ad hoc. A lot of this, it had no precedent. They were in uncharted waters.

So it's hard to say, you know, let's blame the Fed. Let's blame shortages in Long Beach or Los Angeles and the ports. All this stuff was very difficult to navigate. I think a main factor, though, for Joe Biden was that the markets like Jerome Powell. We see a rally today. I think Powell is viewed as a very solid guy. I think members of Congress like him. And I think a big factor here is the likelihood that Powell will get confirmed easily. Lael Brainard probably would have, but Powell was a sure bet to get confirmed.

BRIAN CHEUNG: Now, last question here, there are still three vacancies, including the very important vice chair supervision role, which some people were surprised that Brainard wasn't installed and she's going to be taking on the regular vice chair role, who do you expect to see in those positions, which the Biden administration said they'll be filling or, at least, nominating in the next few weeks?

GREG VALLIERE: I don't know. I wouldn't even guess. But I would say this, Brian. I think there'll be at least one who's pretty close to Elizabeth Warren. Elizabeth Warren was not happy. She announced an hour or so ago that she would not be voting for Jerome Powell. So there's going to have to be at least one person for the progressives in the party. But otherwise, no, I'm not-- I don't know the names.

BRIAN CHEUNG: All right, well, we'll have to see if there's any more rumors that come out of the DC Beltway in the weeks leading up to that announcement, but Greg Valliere, again, at--