Race for Fed chair

John Taylor, who is known to favor higher interest rates.

Taylor is perhaps best known for having designed a mathematical equation, dubbed the Taylor rule Republican lawmaker Jeb Hensarling, that would compute and set and growth data.

Another candidate, Kevin Warsh, is a former Fed governor, a proponent of higher interest rates and a son-in-law of Trump associate Ronald Lauder.

Trump told The Wall Street Journal in July he wanted “to see rates stay low.” But in Taylor’s or Warsh’s hands, monetary policy would now be considerably tighter.

Trump has also said he is considering current senior economic advisor Gary Cohn, a former Goldman Sachs president, but the White House may be reluctant to lose Cohn in the middle of hard- fought efforts to enact sweeping changes to the tax code.

Loyalty and the Fed chair

The final known candidate is Jerome Powell, a former high- profile investor and the sole Republican currently sitting on the Federal Reserve Board.

Seen as a centrist, Powell has most often voted with the majority of Fed policymakers and could emerge as a consensus candidate -- not likely to push for higher rates too soon but more sympathetic to the financial industry’s views of regulation.

“Powell is probably more of our regulatory regime,” said Edwin Truman of the Peterson Institute, noting that he considered Yellen a personal friend. “None of them are going to be major disruptors.”

But according to Sarah Binder, a senior fellow at the Brookings Institution who studies political forces affecting the Fed, the subsequent question may be what pressure Trump attempts to exert on the Fed, which is legally independent.

“Put aside the question of the economic context. The thing we know about the president is that he prizes loyalty,” she told AFP.

“We don’t know if he understands the fact the that Fed chair is not part of the Cabinet.”