If confirmed by the Senate, Powell will preside over the central bank’s response to the damage done by last year’s record downturn while fighting off inflation that has spiked in recent months, which put pressure on Biden’s administration and the Fed’s easy money policies.

The president had faced calls from progressive members of his Democratic Party to replace Powell, a Republican, with a more liberal candidate like Fed Governor Lael Brainard, but the White House announced she would serve alongside Powell as vice-chair.

“We can’t just return to where we were before the pandemic, we need to build our economy back better,” Biden said in a statement.

“I’m confident that Chair Powell and Dr. Brainard’s focus on keeping inflation low, prices stable and delivering full employment will make our economy stronger than ever before.”

Appointed by Biden’s Republican predecessor Donald Trump and taking office in 2018, Powell has led the central bank’s response to the massive pandemic downturn, which saw it slash its lending rate to zero and roll out trillions of dollars in liquidity.

The bank has rolled back those measures as the economy has recovered, but inflation has also spiked, fuelling a drop in Biden’s approval ratings.

However, Powell also changed policy at the Fed to keep interest rates lower for longer than normal to spur full employment, particularly for minorities and groups that are often disadvantaged.

Powell and other central bank leaders argue the inflation wave will prove temporary and have said they do not foresee rate hikes at least until the middle of next year.