Today President Trump named Jerome Powell as the new head of the Federal Reserve when Janet Yellen leaves soon -- in February next year. This was surprising in one way - Powell is not a trained economist with a PhD but rather a trained lawyer and he has been on the Federal Reserve board and has tended to agree with the decisions of Janet Yellen. So as a result Powell is expected to continue gradually raising interest rates but is not expected to do anything really unsurprising in his new role. Since 2009, Yellen has raised interest rates four times and is expected to raise rates again in December. Trump has been known to criticize Janet Yellen for keeping monetary policy too loose in the past. The main concern many people have with having Powell as the new head of the Fed is that he will liberalize US financial market regulations too much. The dollar fell slightly after the announcement and the stock market didn't react too much to the news, which was no longer a surprise at the time of announcement. Market watchers will continue to play close attention to what Powell does in the new job: reports have indicated that this is a very difficult place for economic policymakers to be because the US must transition the economy to a "more normal monetary policy."
https://www.bloomberg.com/news/articles/2017-11-01/trump-is-said-to-select-powell-as-fed-chairman-replacing-yellen
https://www.nytimes.com/2017/11/02/business/economy/jerome-powell-federal-reserve-trump.html
https://www.cnbc.com/2017/11/02/trump-picks-jerome-powell-to-succeed-yellen-as-fed-chair.html
Powell, while he may not have the education pre-reqs, has gained much experience working alongside Yellen. It is quite possible he possesses the same ideologies as her, so it is possible the shift in power will not affect policies too much. That's a hypothetical at this point. Only time will tell exactly how Powell plans to run the Fed.
ReplyDeleteLike Adam said, there most likely will not be drastic change in policy after Powell takes the helm as head of the federal reserve. We should continue to see gradual increases in the interest rate, which should have some impact on investment. However, depending how gradual this increase is, it could make no difference at all and just be increasing to keep up with inflation.
ReplyDeleteWe can see what happens. One concern is the great confidence everyone has had in Yellen -- since the economy has been doing well for so long.
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