Pow­ell is Trump’s likely pick to lead the Fed

Calgary Herald - - FP CALGARY - MARTIN CRUTSINGER The As­so­ci­ated Press

Jerome “Jay” Pow­ell, a mem­ber of the Fed­eral Re­serve’s board, is U.S. Pres­i­dent Don­ald Trump’s lead­ing can­di­date to re­place Janet Yellen as the head of the na­tion’s cen­tral bank, with an an­nounce­ment planned for Thurs­day, ac­cord­ing to se­nior ad­min­is­tra­tion of­fi­cials.

One se­nior of­fi­cial said Mon­day that the an­nounce­ment is planned for Thurs­day. Another said Pow­ell is the pres­i­dent’s top choice for the job but stressed that the de­ci­sion still isn’t fi­nal. The two of­fi­cials spoke on con­di­tion of anonymity to dis­cuss per­son­nel mat­ters that have yet to be an­nounced.

Trump’s im­pend­ing an­nounce­ment of his choice to lead the Fed is over­shad­ow­ing this week’s meet­ing of the cen­tral bank’s pol­icy group, com­posed of its board mem­bers and re­gional bank pres­i­dents.

With no pol­icy changes ex­pected when the meet­ing ends Wed­nes­day, in­vestors are in­stead wait­ing to as­sess what Trump’s choice for Fed chair could mean for the di­rec­tion of in­ter­est rates, and per­haps for the econ­omy.

Trump said in an in­ter­view that aired Wed­nes­day that his de­ci­sion had come down to two or three can­di­dates. At the time, the fi­nal­ists were thought to be Pow­ell, Yellen and John Tay­lor, a Stan­ford Univer­sity econ­o­mist. And on Fri­day, Trump sent out a video in which he de­clared that he had some­one “very spe­cific in mind” for the job, say­ing that per­son will do a “fan­tas­tic job.”

In Pow­ell, Trump would be se­lect­ing a pol­i­cy­maker with a rep­u­ta­tion as a mod­er­ate whose stance on in­ter­est rate in­creases would likely de­vi­ate lit­tle from Yellen’s cau­tious ap­proach. Pow­ell would, though, be ex­pected to be marginally more favourable to­ward eas­ing some of the stricter fi­nan­cial rules that were en­acted af­ter the 2008 fi­nan­cial cri­sis. Trump has com­plained that those rules have been too re­stric­tive.

On Wed­nes­day, when the Fed is­sues a state­ment af­ter its meet­ing ends, it’s all but sure to keep rates un­changed. But it might is­sue a hint of what is widely ex­pected: That it’s likely to raise rates modestly at its next meet­ing in De­cem­ber for the third time this year. Another rate hike would re­flect the econ­omy’s steady gains. It would also sug­gest that the Fed is con­fi­dent that in­fla­tion will pick up and reach its two per cent tar­get rate rel­a­tively soon.

“Yellen and many of her col­leagues be­lieve that stronger eco­nomic growth will lead to higher wages and then higher in­fla­tion,” said Sung Won Sohn, an eco­nom­ics pro­fes­sor at Cal­i­for­nia State Univer­sity’s Martin Smith School of Busi­ness.

Fac­tors such as solid eco­nomic growth, along with a stock mar­ket set­ting record highs, are thought to have put the Fed on a path to raise rates modestly later this year. If Trump chooses Pow­ell to suc­ceed Yellen, most an­a­lysts ex­pect the Fed’s pace of rate hikes to re­main grad­ual, with per­haps some pos­si­bil­ity of a slight ac­cel­er­a­tion. Pow­ell, who has been on the Fed board for five years, has been a re­li­able ally in Yellen’s go-slow pol­icy on rate in­creases.

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