Thread by @NickTimiraos

One question I’m getting a lot is how a Brainard Fed would be different from a Powell Fed on rate policy? We laid some of that out in this story today. I’ll elaborate in this thread.
The short answer: They've stated similar views on inflation and policy wsj.com/articles/biden…

But because policy could be nearing an inflection point and because no one at the Fed has had to deal with a problem like the current one, there’s perhaps less certainty about the Powell reaction function or the Brainard reaction function, and any differences therein.

(Note: This isn’t intended as a commentary on the political horserace, I.E., who's up or who's down, which doesn’t feel like it has changed all that much since the summer)

Powell brought Brainard into the policy-setting inner circle (or the “troika,” which consists of the vice chair and the NY Fed president) after the pandemic last year. Brainard had more crisis and Washington experience than anyone else on the board. wsj.com/articles/fed-t…

Brainard was also an early advocate for adopting many of the changes that Powell led his colleagues to adopt in the new policy framework announced in August 2020.

February 2020: federalreserve.gov/newsevents/spe…
November 2019: federalreserve.gov/newsevents/spe…
May 2019: federalreserve.gov/newsevents/spe…

Brainard’s supporters (including Stiglitz) say she has proven herself to be intellectually brave by at times challenging the conventional thinking in macroeconomics and the Fed.

The clearest case was late 2015 on liftoff.

October 2015: federalreserve.gov/newsevents/spe…
Dec 2015 FOMC:

Last year, Brainard spoke approvingly of yield caps: a strategy to provide additional stimulus at the ELB by committing to buy Treasurys in amounts needed to peg certain yields at low levels. federalreserve.gov/newsevents/spe…

There wasn’t a lot of support for this and the Fed didn’t do it

At other junctures, Brainard signaled greater vigilance against upside inflation risks. In September 2018, as the unemployment rate fell below 4% and Trump's deficits provided stimulus, Brainard said the Fed might need to raise interest rates for another year or two.

Brainard was arguably hawkish and more focused on upside risks—see this part about the prospect of raising rates on a *not* gradual path. She spent a good part of that speech explaining why the flattening of the yield curve may not provide much signal federalreserve.gov/newsevents/spe…

That's all in the past. What about the present?

Brainard’s most recent speech (on Sept. 27) seemed more concerned with overreacting to high inflation. federalreserve.gov/newsevents/spe…

See this section:

Brainard spent the bulk of those remarks providing detail around a view that would explain why labor markets may not be as tight as openings imply.

She pushed back against those who have argued that labor supply may have been permanently scarred. wsj.com/articles/fed-o…

Brainard also provided her inflation dashboard in speeches in July and September. (July speech is on the left, September on the right)

Stiglitz, for whom Brainard worked when he chaired the CEA, told me he thought Brainard's background would make her more patient than Powell on inflation.

“Idle labor is a big loss, and the evidence of significant losses from moderate inflation just aren’t there."

Others are less sure about such predictions or comparisons

The chair often speaks on behalf of the broader rate-setting committee and may have to balance his or her personal views with the broad center of the committee. Yellen was notably more dovish as vice chair than as chair

Either way, most analysts expect policy continuity w/Powell if Brainard is chair, just as Powell represented continuity w/Yellen.

This explains why other issues (digital currencies, climate, and regulation) where there are more notable differences, have received more attention.