President Joe Biden on Tuesday named Federal Reserve Vice Chair Lael Brainard to head the National Economic Council (NEC), and said he would nominate long-time adviser Jared Bernstein to become the chief White House economist.

The decision, announced after markets closed, gives Biden a pair of trusted hands and Washington insiders to steer economic policy as the risk of recession is fading, but not quite off the table. Big fights loom with the Republican-controlled House over raising the debt ceiling and spending cuts.

The White House said Biden would nominate Brainard to replace Brian Deese, who announced his departure earlier this month, while Bernstein, if confirmed by the Senate, would replace outgoing CEA Chair Cecilia Rouse, the first Black American to hold the post, who is returning to Princeton University after a two-year leave of absence.

Biden also named Bharat Ramamurti, currently deputy director of the NEC, to also serve as an adviser for strategic economic communications, and CEA member Heather Boushey to also serve as chief economist to his “Invest in America” cabinet.

The Labor Department’s chief economist, Joelle Gamble, was named one of Brainard’s deputies. The statement made no mention of a potential replacement for Brainard at the Fed, or an additional senior economist for the CEA.

The changes in Biden’s top economic team come as Biden struggles to convince skeptical Americans his economic policies are working. The new crew will help oversee trillions in new federal spending on everything from semiconductor manufacturing to roads and bridges and green tax credits.

Brainard’s switch from the independent central bank to a White House role comes as the Fed navigates extensive challenges of its own as it fights to bring down inflation, leaving an intellectual and political hole at a key moment.

The Fed is trying to achieve the Holy Grail of monetary policy – a ‘soft landing’ that involves tamping down inflation without causing a recession. By the Fed’s preferred measure, inflation is running more than twice its 2% target rate.

On Tuesday, data showed consumer prices rose in January but posted their smallest annual rise since October 2021, a sign that goal is in sight.

DEBT LIMIT FIGHT

The next NEC director and CEA chair will help shape the Democratic Biden administration’s economic policy, from executive orders to congressional spending bills, and in particular staving off a U.S. default in the face of a hostile U.S. House of Representatives now controlled by the Republicans.

Republicans say they won’t raise the statutory U.S. debt ceiling without cutting future spending; the White House says it won’t discuss spending cuts without a debt ceiling vote first.

Treasury Secretary Janet Yellen said on Jan. 19 that the United States has reached its current $31.4 trillion borrowing cap, but can continue paying its bills until June by shuffling money between various accounts. Investors have warned edging closer to that deadline could have dire market repercussions.

Bernstein told a think tank audience in Washington last week that Republican efforts to “weaponize” the needed boost in the debt limit was “especially reckless” at a time when the economy was slowing and inflation was still coming down.

Both he and Brainard argue labor market disparities are curbing the country’s long-run growth potential; neither have in-depth experience negotiating with hostile lawmakers.

One of the biggest priorities will be overseeing about $1.5 trillion in spending on infrastructure, manufacturing and green tax credits passed over the past two years as infrastructure, inflation and semiconductor chip bills.

BRAINARD LEAVES HOLE AT FED

Brainard, a Harvard-educated Democrat, has been an economic heavyweight at the central bank, known for her meticulous and thorough preparation, and particular expertise on global economics. It likely means a key role remains unfilled for months at an especially tricky time for the central bank.

During almost a decade there, she extended her influence across both monetary policy and financial regulation.

As a top Treasury official during the Obama administration, Brainard led negotiations with G20 countries, including China, on now long-established G20 communique language to avoid competitive devaluation of currencies and pursue policies to reduce excessive current account imbalances.

While Biden decided in late 2021 to renominate Fed Chair Jerome Powell, a Republican, to the top position, it was twinned with the elevation of Brainard to the No. 2 slot, ensuring a counterweight on monetary policy and regulation. Unlike Brainard, a PhD economist, Powell is an investment banker and lawyer by training.

A bane of Wall Street, Brainard has also pushed the Fed to take more actions on requiring banks to account for the risks of climate change and has been the most high-profile supporter of a central bank digital currency, both of which have pitted her against both Powell and other senior colleagues in scope and ambition.

BIDEN ECONOMIC MESSAGE SEEN AS WEAK

While the U.S. economy is out-performing other rich nations, and job creation is at a record, Biden’s approval rating remains low and his performance on the economy is seen as weak.

In his State of the Union Speech last week, Biden doubled down on pledges to rout ‘trickle down’ economics from policymaking and hit out at companies for profiteering.

Bernstein last week conceded the White House’s early description of inflation as “transitory” had missed the mark.

He said the administration was keeping a close eye on energy prices, citing tight refinery capacity and China’s reopening as possible pressure points.

Economic data show inflation is moderating after spiking to a 40-year high last summer, and unemployment is at its lowest rate in over 53 years, but the overall mood is still mixed, economists and pollsters report, with Biden’s approval ratings hovering at just over 40%.

Annual inflation as measured by the consumer price index dipped from about 9% in June to 6.4% as of January.