Non-economist Powell begins Fed reign
WASHINGTON: Jerome “Jay” Powell, the Republican former investment banker tapped by President Donald Trump to lead the United States Federal Reserve, takes the reins of monetary policy today.
Perhaps the wealthiest Fed chair ever, Powell — who turned 65 yesterday — succeeds Janet Yellen, who ends the first and only term held by a woman.
He takes over at a remarkably quiet time following a decade of economic turmoil that forced the central bank into uncharted policy waters to try to recover from the global financial crisis.
Nevertheless, Powell, one of the rare non-economists to fill the role, could soon face difficult policy decisions that will put him at the centre of debate over how fast to raise interest rates.
Wages last month posted the biggest annual increase in nearly 10 years, with the growing US economy adding jobs at a solid pace, and while business and consumer confidence remained high just as a massive corporate tax reform was starting to take effect.
This comes at a time when all major global economies are growing simultaneously, an unusual and happy coincidence, but one that begins to raise concerns about when the recovery will end. And how.
“His biggest challenge will be leading the further calibration of interest rates when the US economy is late cycle amid a synchronised global economic upswing and fiscal stimulus is on its way,” said Kathy Bostjancic of Oxford Economics.
As Yellen departs, the only Fed chair in nearly 40 years not to be reappointed for a second term, she leaves an economy with unemployment at a 17-year low of 4.1 per cent — half the rate when she became chair — quiet inflation and nearly four years of uninterrupted growth.
In addition, she steered the Fed out of its massive bond-buying programme and began the process of “normalisation”, or reducing the size of investment holdings, without upsetting the skittish financial markets.
“Yellen hands Powell a more ‘normalised’ economic,” said Bostjancic.
The first rate increase of this year is widely expected to come next month, which also will feature the first press conference by Powell, who has been on the Fed board since 2012.