President Trump nominates Jerome Powell to be next Fed chairman
WASHINGTON — President Donald Trump tapped Jerome Powell on Thursday 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 favor 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 Thursday.
Powell himself said it had been a privilege to serve under Yellen and her predecessor, Ben Bernanke, and said he'd 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 Feb. 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. The Yellen Fed and its go-slow approach to rate hikes have been credited with helping nurture the continued recovery from the Great Recession. Now, she will become the first Fed leader in decades not to be offered a second term after completing a first.
Trump acknowledged in a recent TV interview that his decision on a Fed chair might have less to do with Yellen's performance than with wanting to impose his own stamp on the Fed.
Powell has built a reputation as a collegial centrist on the Fed's board. Like the current and recent board members, Powell never dissented from the Yellen Fed's moves to embrace low rates and to adopt other unorthodox policies to help sustain the economy's recovery from the 2008 financial crisis and the worst downturn since the Great Depression. In a book about his years at the Fed, former Chairman Ben Bernanke praised Powell "as a moderate and a consensus builder."
His background makes Powell something of an outlier in a Fed long defined by distinguished research economists like Yellen, whose work has examined the relationship between inflation and wages, and Bernanke, a scholar of the Great Depression. But Aaron Klein, a fellow at the Brookings Institution who worked in the Obama administration's Treasury Department, suggested that the absence of a scholarly background in economics should not impede Powell's ability to lead the central bank.
"I do not believe you need a Ph.D. in economics to chair the Fed," Klein said. "What's needed is judgment, confidence and the ability to know when the models and data and the best minds of the Fed staff may have missed something."