A little over a week ago, President Trump nominated Jerome Powell to run the Federal Reserve once current chair Janet Yellen’s term expires in February. While this is the first instance in several decades that a Fed Chair has not been re-nominated for a second term, many are referring to Mr. Powell as a “Republican Yellen” given that he will likely follow a similar policy path to the one Yellen would have taken.
Powell has been a Fed governor since 2012 and is no stranger to the workings of the Federal Reserve. A lawyer by training, Mr. Powell has previously worked as an official for the U.S. Treasury and as an executive at several firms in the financial sector. While his background stands in contrast to many previous chairs, many of whom had a more academic background, Mr. Powell does not have a dissenting history when it comes to previous monetary policy votes during his time as a governor and he is expected to maintain existing Fed plans. This means we can expect several more rate hikes next year, should the economy perform as expected, in addition to a continuation of the Fed’s current path for shrinking its balance sheet. While Mr. Powell is expected to keep the status quo, he is also said to favor more deregulation than Yellen and will likely be supportive of future policy that eases financial regulations especially when it comes to smaller banks.
Clarida, Richard. “The Powell Fed: Continuity in Monetary Policy.” Pimco. Nov. 2, 2017. https://blog.pimco.com/en/2017/11/The%20Powell%20Fed%20Continuity%20in%20Monetary%20Policy