Jerome H. Powell was nominated in late November by President Trump to lead the Federal Reserve.
Current Fed Situation
The Federal Reserve (Fed) Board of Governors supervises and regulates the operations of the Federal Reserve Banks and the U.S. banking system in general. They are also the decision making body for monetary policies. The Fed Board of Governors consists of 7 members, of which at present there are 3 vacant seats due to resignations by members.
In November current Fed Chairman Janet Yellen stated that she will step down from Fed after her term ends in February 2018. This would mean that after she steps down, there will be 4 vacant seats in the Fed Board of Governors.
Therefore President Trump will be able to nominate 4 candidates of his choice to fill these seats, and revamp the Fed. Thus it is expected that the candidates whom he will most likely nominate are likely to share the same views as him, which is the deregulation of financial markets and gradual interest rate rises.
Analysis on the new Fed Chairman Nominee
Powell has been scrutinised by market watchers on having no Economics of Finance related education background unlike past Fed chairmen, and may not have strong enough fundamental knowledge on economic policies to manage Fed well. However, he has been part of Fed since 2012 and has sufficient experience and deemed to have knowledge on how the organization functions. The Senate Banking Committee were also convinced by Powell’s principals and experience despite him not being an economist by training, and voted to recommend him for confirmation as Federal Reserve chair after a confirmation hearing.
Based on his recent speeches, it can be seen that he shares a similar view as Yellen. Thus it is unlikely that his policies will differ much for the current ones, which is to gradually nominalise rates based on the economic situation and to reduce Fed’s balance sheets predictably. However unlike Yellen, he has indicated previously that he does not have major concerns should some regulations be relaxed, such as the Volcker Rule for community banks. This indicates that he may be more receptive to calls for adjusting financial regulation prudently.
