WASHINGTON -- President Obama said his pick for the next head of the Federal Reserve would need to focus on both parts of the central bank’s dual mandate -- keeping inflation in check and promoting maximum employment -- while helping improve the lives of average Americans.
Appearing to confirm widespread expectations that Fed Chairman Ben S. Bernanke is not seeking a third term, Obama said this weekend that he had not made a final decision on a nomination.
An announcement would come in “the next several months,” Obama said.
Bernanke’s second four-year term as chairman ends Jan. 31 and he has not indicated he wants to be reappointed.
“I’ve narrowed it down to some extraordinarily qualified candidates,” Obama said in a New York Times interview published Sunday. Whoever Obama nominates, even if it is Bernanke, the Senate must confirm the choice.
Obama declined to say anything more about the candidates or confirm a report last week that former Treasury Secretary Lawrence H. Summers was the front-runner for the post.
Summers, who was Obama’s top economic advisor from 2009 to 2010, and Fed Vice Chair Janet L. Yellen, are the leading contenders to replace Bernanke, according to administration officials familiar with the deliberations but who requested anonymity because they were not authorized to speak publicly.
In the interview, Obama explained his criteria for picking a new Fed chairman, one of the most important nominations he’ll make in his second term as president. Analysts began scouring the comments for clues about which way he might be leaning.
“What I’m looking for is somebody who understands the Fed has a dual mandate, that that’s not just lip service, that it is very important to keep inflation in check, to keep our dollar sound, and to ensure stability in the markets,” Obama said.
“But the idea is not just to promote those things in the abstract,” he continued. “The idea is to promote those things in service of the lives of ordinary Americans getting better.”
Obama went on to warn against the creation of new asset bubbles, such as the one in the housing market that led to the Great Recession and financial crisis.
“And when unemployment is still too high, and long-term unemployment is still too high, and there’s still weak demand in a lot of industries, I want a Fed chairman that can step back and look at that objectively and say, let’s make sure that we’re growing the economy, but let’s also keep an eye on inflation, and if it starts heating up, if the markets start frothing up, let’s make sure that we’re not creating new bubbles,” Obama said.
Obama’s emphasis on inflation could bode well for Summers. He is viewed as being more concerned about the effect of the Fed’s stimulus policies on prices than Yellen, who has been a strong ally of Bernanke in taking unprecedented steps to reduce unemployment.
But Obama also could have been making a case for Yellen in his praise of Bernanke in the interview.
“Ben Bernanke, by the way, has done a fine job as Fed chairman,” Obama said. “And when you look at Ben Bernanke’s testimony, not just last week but over the last couple of years, what he’s consistently said is right now, our priority needs to be growing the economy faster and strengthening incomes for ordinary Americans.”
Obama had a close relationship with Summers during his time in the White House. But the president is under pressure from many Democrats to choose Yellen, who would be the first woman ever to lead the Fed.