Student blog | Jerome Powell as Fed Chair Means More of the Same

All eyes have been on the Federal Reserve this year; investors and economists have been awaiting decisions on the direction the bank is going to take as the U.S. economy continues to recover. Wednesday, the Fed took center stage again when the White House announced that President Trump will indeed be nominating a new chairman, opting to replace Janet Yellen when her first term expires in February. White House officials reportedly notified Federal Reserve Governor Jerome Powell that he would be Trump’s choice. This is unprecedented, seeing as every chair has been reappointed to a second term since World War II.

So, who is Jerome Powell?

The 64-year old was appointed to the board of governors by President Obama in 2012. He spent time as a lawyer and investment banker before joining President George H.W. Bush’s administration to serve as Assistant Secretary and Undersecretary of the Treasury. He later became a partner at a New York-based private equity firm, The Carlyle Group, and a visiting scholar at the Bipartisan Policy Center, all before joining the board of governors. Powell is expected to continue Yellen’s slow and cautious approach to monetary policy and financial regulations, though some on Wall Street are confident he can be an ally in the push to deregulate.

The announcement comes at an important time for the Fed, which just concluded its monthly meeting and elected not to raise interest rates yet. The bank began raising rates in December 2015, having kept them low since the recession to stimulate economic growth. Since then, there have been four rate increases and another is likely on the way in December. Powell is expected to stay the course, keeping an eye on inflation, which has been growing more slowly than anticipated, in addition to other indicators that may suggest the economy is ready for changes in policy.

He is also expected to continue with the plans to normalize the Fed’s balance sheet, which were announced earlier this year. These plans will take over at a consequential time, for they will test the central bank’s true power over the economy. Many institutions around the world, including the European Central Bank and Bank of Japan, will be watching closely to see if the U.S. succeeds in its attempt to be the first major economy to unwind the drastic measures taken during the recession.

Brian O’Donnell is a senior from Fairfield, Connecticut. He is triple major in Finance, Economics, and Public Policy with a minor in Public Policy and International Affairs. Along with being an HCM Tower Scholar, Brian is a Hilltop New Century Scholar and Francis Ouimet Scholar. Brian’s areas of interest include fiscal and monetary policy as well as globalization and international trade.