Economist Richard Clarida won Senate confirmation to be vice chairman of the Federal Reserve, reinforcing U.S. central bank leadership as it faces criticism from President Trump over plans to keep increasing interest rates.
Clarida, a Columbia University professor and global strategic advisor at Pacific Investment Management Co., received backing Tuesday in a vote of 69 to 26. In a separate voice vote, the Senate confirmed him to the remainder of a 14-year term as board governor that expires in 2022.
During his confirmation hearing in May, Clarida voiced support for Fed Chairman Jerome H. Powell’s drive to raise rates from abnormally low levels and vowed to ignore political pressure from the president and elsewhere in deciding policy.
Trump, who nominated both Powell and Clarida, has complained about rate hikes, a break from more than two decades of White House tradition of avoiding comments on monetary policy out of respect for Fed independence.
The central bank, which has raised rates five times since Trump took office in January 2017, is on course to increase them again next month with the unemployment rate near a multi-decade low and inflation close to the central bank’s 2% target. Investors are almost fully pricing in a September rate increase and putting more than a 60% probability on a December hike, according to trading in federal funds futures.
Clarida’s confirmation brings to four the number of governors on the seven-seat Fed Board in Washington.
No vote was taken on two other Fed governor nominees — Michelle Bowman, a Kansas state banking commissioner, and Marvin Goodfriend, a former Richmond Fed official. His confirmation faced opposition from some Democrats following a grilling on his hawkish views during his Senate Banking Committee confirmation hearing this year.
The 61-year-old Clarida brings a mix of skills to the central bank’s No. 2 position. These include knowledge of financial markets gained during more than a decade at asset manager Pimco, and insights into how Washington works from his time at the Treasury Department under President George W. Bush.
He’s also got a doctorate in economics, something that Powell — a lawyer by training — lacks, and has done extensive academic research into monetary policy, currency exchange rates and international capital flows.
At Pimco, Clarida was an early progenitor of the “new neutral” concept that argues that equilibrium global interest rates — ones that neither spur nor stifle economic growth — are significantly lower than they were in the past.
In a Dec. 13 Bloomberg Television interview, he reckoned that rate in the U.S. is now closer to 2% than to 3%. Fed policymakers, in contrast, peg the neutral rate at 2.9%, according to the median projection of officials in June.
The vice chairman plays a critical support role for the central bank’s leader, and often heads special projects at the request of the chair. Along with the president of the New York Fed, who acts as the central bank’s eyes and ears on Wall Street, the deputy typically forms a key voting bloc with the chairman on both policy and strategy.