President Biden had two important actions to take this week. The first, on Monday, was to sign into law the $1.2 trillion infrastructure spending plan—the Infrastructure Investment and Jobs Act. The second was to announce his nomination for new Fed chair.The announcement around this second decision was, however, slightly postponed. It went from being labeled “imminent” on Monday, to “in the next four days” on Tuesday, then to “before Thanksgiving” on Thursday. When Biden does finally announce his nomination for Fed chair in the coming days, it is then up to the Senate to ratify or reject.
Unfortunately, these two policy actions are not mutually exclusive. It is increasingly clear that as the country’s debt and the Fed’s balance sheet both increase, fiscal and monetary policy are becoming more closely intertwined, leading to a greater legitimacy around questions about the Fed’s independence. These two decisions on spending and the Fed chair, and how they are linked, is the topic of this Economics Weekly.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.