Trump fo­cuses on choos­ing the next Fed chair

Pres­i­dent prom­ises to re­veal can­di­date as he leans to­ward Powell

The Star Malaysia - StarBiz - - Foreign News -

WASH­ING­TON: Pres­i­dent Don­ald Trump stoked the sense of drama sur­round­ing his choice for the next Fed chair­man as he tweeted out a video teas­ing an an­nounce­ment he said would come this week.

The pres­i­dent is lean­ing to­ward ap­point­ing Fed­eral Re­serve gover­nor Jerome Powell to be the next chair­man of the Fed, ac­cord­ing to three peo­ple fa­mil­iar with the mat­ter.

“Peo­ple are anx­iously await­ing my de­ci­sion as to who the next head of the Fed will be,” Trump said in short Instagram video he sent to his 41 mil­lion Twit­ter fol­low­ers. “It will be a per­son who hope­fully will do a fan­tas­tic job. And I have some­body very spe­cific in mind.”

“You’ll be very im­pressed,” Trump promised, set­ting up a cliffhanger for an an­nounce­ment that is typ­i­cally a dry event mainly fol­lowed by fi­nan­cial mar­kets and econ­o­mists.

Trump’s back­ing of Powell isn’t yet fi­nal, the peo­ple cau­tioned, and Trump could change his mind at any time. Yet his pref­er­ence for Powell dims cur­rent Fed chair Janet Yellen’s chances for a sec­ond term at the helm of the world’s lead­ing cen­tral bank.

Yellen’s first term ends in Fe­bru­ary, and Trump has been work­ing from a short­list of five can­di­dates de­vel­oped by his ad­vis­ers that in­cludes the cur­rent chair and Powell. Other can­di­dates he’s con­sid­er­ing are Stan­ford Univer­sity economist John Tay­lor, for­mer Fed gover­nor Kevin Warsh and Na­tional Eco­nomic Coun­cil di­rec­tor Gary Cohn.

Nei­ther the pres­i­dent nor press sec­re­tary Sarah Huck­abee San­ders would say whom he favours for the ap­point­ment.

The Bloomberg Dol­lar Spot In­dex dipped to ses­sion lows on news that Powell had emerged as the fron­trun­ner, and yields on 10-year Trea­sury debt fell as much as four ba­sis points to 2.42%. The US stock mar­ket’s bench­mark S&P 500 In­dex ex­tended gains.

A nom­i­na­tion for Powell is seen by in­vestors as sig­nal­ing con­ti­nu­ity for mone­tary pol­icy. Spec­u­la­tion he will ul­ti­mately be Trump’s pick drove them to buy US stocks and bonds.

Trump’s ad­vis­ers have been steer­ing him to­ward choos­ing ei­ther Powell or Tay­lor for the job, ac­cord­ing to sev­eral peo­ple fa­mil­iar with the de­lib­er­a­tions.

All of the peo­ple who dis­cussed the mat­ter did so on con­di­tion of anonymity. Powell is favoured by Trea­sury sec­re­tary Steven Mnuchin, and Tay­lor by vice-pres­i­dent Mike Pence, peo­ple fa­mil­iar with the mat­ter have said.

Mnuchin last Satur­day said Trump for now is fo­cused on choos­ing the next Fed chair, not also on nam­ing a new vice chair to re­place Stan­ley Fis­cher, who stepped down this month. Trump in an Oct 20 Fox News in­ter­view hinted that he may make two picks at the same time.

Talk­ing to re­porters during a flight to Abu Dhabi, Mnuchin de­clined to com­ment fur­ther on who he favours for the Fed chair po­si­tion but said he’d spo­ken with Trump on the mat­ter while vis­it­ing the Mid­dle East this week.

“I do have a good re­la­tion­ship with Yellen,” Mnuchin said. “I ex­pect who­ever is ap­pointed by the pres­i­dent as the Fed chair I will con­tinue that very good re­la­tion­ship, whether it’s her or not.”

Obama ap­pointee

Powell, a Repub­li­can who was ap­pointed to the board in 2012 by pres­i­dent Barack Obama, has backed Yellen’s grad­ual ap­proach to rais­ing in­ter­est rates and earned a rep­u­ta­tion as a non-ide­o­log­i­cal prag­ma­tist.

A lawyer by train­ing, Powell man­aged the Fed’s re­sponse to the 2014 flash crash in Trea­sury debt. The 64-year-old, who goes by Jay, served at the Trea­sury Depart­ment un­der pres­i­dent Ge­orge H.W. Bush, even­tu­ally end­ing up as un­der­sec­re­tary for do­mes­tic fi­nance.

Trump com­pleted his in­ter­views with Fed chair con­tenders last week, sit­ting down with Yellen at the White House on Oct 19 for half an hour. Yellen, whose term as chair ends on Feb 3, came across as pol­ished during their meet­ing, and in the sub­se­quent days, Trump went out of his way to praise her.

“In one way, I’d have to say, you’d like to make your own mark, which is maybe one of the things she’s got a lit­tle bit against her,” Trump told Fox Busi­ness Net­work. “But I think she’s ter­rific, we had a great talk, and we’re ob­vi­ously do­ing very well to­gether if you look at the mar­kets.”

Im­pres­sive meet­ing

Tay­lor also im­pressed Trump after an hour­long meet­ing at the White House ear­lier this month, sev­eral peo­ple fa­mil­iar with the mat­ter said.

The pres­i­dent has said pri­vately at least twice in the last week that he’s ruled out ap­point­ing Cohn to the job, ac­cord­ing to two peo­ple who heard the in­for­ma­tion di­rectly from Trump. He’s told ad­vis­ers that Cohn is do­ing a great job in his cur­rent role and that he wants to keep him at the White House through con­gres­sional con­sid­er­a­tion of his pro­posed tax over­haul, ac­cord­ing to an­other per­son.

Warsh, mean­while, lacks sup­port from Mnuchin, ac­cord­ing to two other peo­ple fa­mil­iar with the process, though they would not say why.

His ten­ure on the Fed board has been crit­i­cised by a di­verse group of econ­o­mists rang­ing from Scott Sum­ner to No­bel lau­re­ate Paul Krug­man. And his con­sid­er­a­tion for the top post has rekin­dled a feud with Ran­dal Quar­les, who was con­firmed as a Fed gover­nor and vice chair­man for su­per­vi­sion ear­lier this month, peo­ple fa­mil­iar with the mat­ter said.

Mnuchin was aware of Quar­les’s con­cerns about Warsh, the peo­ple said. — Bloomberg

Short­listed can­di­date: Trump’s back­ing of Powell isn’t yet fi­nal. Yet his pref­er­ence for Powell dims Yellen’s chances for a sec­ond term at the helm of the world’s lead­ing cen­tral bank. — AP

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