Trump expected to tip insider Jerome Powell to lead Fed

President Donald Trump is expected to nominate Jerome H. Powell as the next chairman of the Federal Reserve, replacing Janet L. Yellen, whose term expires early next year, according to two people familiar with the plans.

Powell, a Fed governor since 2012, is a Republican with deep roots in the party’s establishment and in the financial industry.

He has steadily supported Yellen’s approach to monetary policy and financial regulation, creating an expectation that he would be unlikely to attempt large or sharp changes in the Fed’s course.

One White House official described Powell as a “safe” choice as well as the candidate who most closely fit Trump’s penchant for filling top jobs with characters from “central casting,” as he has often put it.

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Both people familiar with the president’s thinking, who spoke on the condition of anonymity, cautioned that Trump was notoriously mercurial and liked creating drama around important personnel decisions.

However, both said the president appeared set on Powell. An announcement could come as soon as Thursday, after the Fed wraps up a two-day policy meeting on Wednesday and before Trump leaves Friday for a 12-day Asia trip.

The choice would cap an unusually public selection process, during which the president has openly discussed his views of various candidates, asked Republican senators to vote by raising their hands for those under consideration and sought the opinion of a television host.

Trump also posted a video on Instagram promising “everybody will be very impressed” with his selection.

In looking past Yellen, Trump would be breaking with long-standing precedent. Every Fed chairman in modern history who completed a first four-year term was nominated for a second.

The last three Fed chairmen were nominated for new terms by a president of the opposite party. And Trump has praised Yellen’s performance: During her four years, unemployment has fallen sharply, inflation has remained low and the economy is growing.

“You like to make your own mark,” Trump said last week, by way of explanation. In choosing Powell, however, Trump would be resisting pressure by conservatives to make a larger mark on the Fed’s management of the economy.

Many conservatives, including Vice President Mike Pence, favoured the selection of John B. Taylor, a Stanford economist who has been an outspoken critic of the Fed’s monetary policy.

Powell, by contrast, has voted for every Fed policy decision since 2012, although he expressed some reservations in internal debates about the extent of those efforts.

In recent years, he has backed the methodical unwinding of the Fed’s stimulus campaign, which involved purchasing $4 trillion worth of Treasuries and mortgage-backed securities to help the economy recover from the 2008 financial crisis.

A survey of 144 investors conducted by Evercore ISI found that they expected Powell would push rates modestly higher than Yellen over time. Powell also has sought a middle ground on the contentious debate over financial regulation.

Trump and congressional Republicans argue that excessive regulation is restraining economic growth. At a Senate hearing in June, Powell agreed that there was room to improve regulation, but he described the Trump administration’s proposals as a “mixed bag,” adding that he opposed some of the specific proposals.

Describing an effort already underway at the Fed, he said: “The whole idea is to preserve the significant core reforms that were made but to go back and clean up our work.”

Powell would require Senate confirmation, and his views, particularly on regulation, could draw opposition from some conservatives in the Senate, 21 of whom voted against his confirmation as a Fed governor in 2014.

Two Republicans on the Senate banking committee, which will consider the nomination, had previously raised concerns about Powell: Senator Tim Scott of South Carolina and Senator Pat Toomey of Pennsylvania.

If nominated and confirmed, Powell would be the first Fed chair in four decades without an economics degree. He brings a background in financial markets, a contrast with Yellen and her predecessor, Ben S. Bernanke.

People who have worked with Powell say he studied economics assiduously after joining the Fed, gathering stacks of papers on the questions of the day, then reading and discussing the findings with colleagues.

Jon Faust, a professor of economics at Johns Hopkins University who worked with Powell at the Fed, said Powell had endeavoured to understand monetary policy and had demonstrated a strong grasp of the subject.

But Faust said it might be particularly important to have a trained economist as chairman if there was another recession.

“If the economy broadly behaves, I don’t think it’ll be of great consequence,” Faust said. “If we were to face another period where you need innovative and creative leadership, Jay has a lot of skills, and it could still go OK, but you’d like to add to those skills a lifetime of studying monetary policy.”

Powell (64) is a Washington native who has spent most of his life here in a mix of public and private roles. He studied politics at Princeton University, then earned a law degree from Georgetown University before embarking on a career in investment banking in New York.

-New York Times