- The new Fed chairman will keep the same course as before
- If tensions surface in the economy, his lack of economic training could take a toll
- His aptitude for the job will be measured by the Fed’s ability to manage critical situations
The president of the United States has chosen Janet Yellen’s successor as U.S. Federal Reserve chair. It is Jerome Powell, who has served on the Fed board since December 2011 and, prior to that appointment, worked as a civil servant, a business lawyer and an administrator in the world of investment banking. As the media have pointed out, Mr. Powell is a man who does not swim against the tide. While serving at the Fed he always supported Ms. Yellen’s position on monetary policy. True, on several occasions, he also spoke in favor of deregulation (which is what President Donald Trump likes to hear). However, his record as an active, determined opponent of regulation is poor.
Most probably, Mr. Powell will bring about no major change in monetary policy. All observers believe that he will continue the soft-landing approach introduced by his predecessor. He will keep a mild expansionary approach for a few more quarters, and then start draining liquidity if the economy remains healthy. Can we, then, summarize this nomination as a choice for continuity? The answer is mixed.