Trump Will Decide on Federal Reserve Chair “Very Shortly”

Blog posted On October 26, 2017

Current Federal Reserve Chair Janet Yellen’s term is set to expire in February 2018.  The election of President Trump led to considerable speculation as to whether or not, Yellen would serve out the duration of her term, and who would be her successor.  With the end of her term nearing, the president is considering five other candidates, including Yellen, to take over as Federal Reserve Chair.  On Monday, President Trump announced, “I will make my decision very shortly, pretty shortly.”

Two of the candidates Trump is considering are known as “fierce critics” of Fed Chair Yellen.   Stanford professor John Taylor, and Former Fed governor and Republican economic official Kevin Warsh, are both reportedly being considered for the role.  Based on Taylor and Warsh’s criticisms of Yellen and the Federal Open Market Committee (FOMC)’s low-interest rate policy, they could be expected to raise interest rates at a faster pace.

Top economic advisor Gary Cohn and current Fed Governor Jerome Powell are also reportedly being considered for Fed Chair.  Goldman Sachs alum Cohn is expected to provide more continuity in his policy decisions, but would most likely loosen restrictive regulation.  Fed Governor Powell has served on the FOMC since 2012, and overseen the economic recovery.  He is also likely to maintain many existing monetary policies but pull back on regulations.

President Trump is also considering keeping Yellen on to serve another term.  During her tenure, unemployment has dropped to a 16-year-low and the stock market has rebounded to record highs.  The president has previously expressed support for low interest rates and has been praising the stock market’s recent rally.  However, his Republican base is favorable of deregulation and Dodd-Frank reform, which may require a new Fed Chair to step in.

While awaiting Trump’s decision, the Federal Reserve continues its efforts to wind down its economic stimulus programs, gradually raise interest rates, and shrink its substantial balance sheet.  The Washington Post reports that each of the five candidates have met privately with the president ahead of his upcoming announcement. 

Sources: Reuters, Washington Post