Trumps Picks Jerome Powell to Take Over as Fed Chairman
On Thursday, President Donald Trump announced that he has selected Republican Jerome Powell as the Federal Reserve Chairman.
Powell, if confirmed, will officially take on the powerful position once the current Chair Janet Yellen’s term ends in February of next year.
Powell has had leadership roles in both the George W. Bush and Barack Obama administration and was appointed to the Fed by former President Obama in 2012.
In the announcement of Jerome’s nomination, Trump said that he will direct “sound monetary policy and prudent oversight of the financial system.”
“Today is an important milestone on the path to restoring economic opportunity to the American people,” said Trump. “He’s strong, he’s committed and he’s smart, and if he is confirmed by the Senate, Jay will put his considerable talents and experience to work leading our nation’s independent central bank.”
“I’m both honored and humbled by this opportunity to serve our great country,” said Powell. “If I am confirmed by the Senate, I will do everything within my power to achieve our congressional assigned goals of stable prices and maximum employment.”
He also praised both Yellen and the former Fed Chairman Ben Bernanke for their leadership and efforts during an especially tough time for the U.S. economy.
Trump had previously criticized how Yellen had run the Fed, but over time has grown to respect her. He also praised her and said she is “a wonderful woman who’s done a terrific job” and that they “have been working together for 10 months and she is absolutely a spectacular person. Janet, thank you very much. We appreciate it.”
Powell’s nomination was expected and the media has been referring to him as Trump’s first pick for over a month.
“Jerome Powell is a smart choice for Fed chair,” said Richard Clarida, global strategic advisor at bond giant Pimco. “He is likely to provide monetary policy continuity by adopting Yellen’s framework of gradually normalizing rates and predictably reducing the Fed’s balance sheet. He is also likely to be more receptive to calls for adjusting financial regulation prudently, especially for smaller banks.”
However, the Senate Banking Committee seems to be divided on Powell’s nomination.
Chairman Mike Crapo (R-Idaho) praised Trump’s decision, while the Democratic Sen. Sherrod Brown (Ohio) said he was “disappointment” and was hoping for the re-nomination of Yellen.
So what does the future hold for the Federal Reserve?
The Fed is expected to approve another interest rate increase in December and this will be the fifth hike during Yellen’s term.
“Mr. Powell’s recent comments on monetary policy are basically interchangeable with recent comments by Janet L. Yellen, the current Fed chairwoman. In a June speech, he said strong job growth weighed in favor of raising interest rates while weak inflation suggested the need for caution,” writes the New York Times.
Powell has said in the past that increases in rates should be expected.
“If the economy performs about as expected, I would view it as appropriate to continue to gradually raise rates,” said Powell.
However, the key word in this statement is ‘gradually.’
“Yellen and Powell have both supported a slow, steady increase in interest rates toward historic averages. The two were among several Obama Fed appointees who argued that increasing interest rates too quickly could stifle the recovery from the 2008 recession,” writes The Hill.
“Powell has also called for moderate fixes to the Dodd-Frank Act that have wide bipartisan support among regulators, including Yellen. A former lawyer and investment banker, Powell had overseen the Fed’s financial regulatory efforts until the confirmation of Randal Quarles as the bank’s vice chairman of supervision.”
Author’s note: Powell won’t likely be much of a change-agent, but I think new leadership will be a good thing for the Fed. This role holds a lot of power, but the central bank Chair also comes with limited resources.