‘Safe pick’ for Fed chairman

President Donald Trump yesterday tapped Jerome Powell to replace Janet Yellen as Fed chair when her term ends in February, choosing a moderate member of the Fed’s board who has backed Yellen’s cautious approach to interest rate hikes.

Powell, 64, is seen as a safe pick whose selection will likely assure investors hoping for continuity at the central bank. Some analysts see Powell, though, as more inclined than Yellen to ease financial regulations and possibly to favour a faster pace of rate increases.

Trump made the announcement in a Rose Garden ceremony with Powell standing beside him. He said Powell had earned the “respect and admiration of his colleagues” in his five years on the Fed’s board.

The President also praised Yellen, the first woman to lead the Fed, whom he decided not to nominate for a second term. He called her a “wonderful woman who has done a terrific job”. In a departure from previous announcements of new Fed chairs, Yellen was not in attendance yesterday.

Powell himself said it had been a privilege to serve under Yellen and her predecessor, Ben Bernanke, and said he would do all he could to meet the Fed’s dual mandates of stable prices and maximum employment.

Sung Won Sohn, an economics professor at California State University-Channel Islands, suggested that the new chair would likely deviate little from Yellen’s policy leadership if the economy performs as expected.

“Mr Powell could be considered a clone of Janet Yellen in a positive sense,” Sohn said. “He will continue the same cautious, gradualist policy in setting interest rates that she did.”

If confirmed by the Senate, Powell would become chairman when Yellen’s term ends on February 3.

Unlike the past three Fed leaders, Powell lacks a Ph.D. in economics and spent years working at investment firms. In choosing him, Trump decided against offering another term to Yellen despite widespread approval for her performance.

Conservative Republicans, who have complained that the Fed has grown too independently powerful, praised the selection.