Jerome Powell likely will be the next Federal Reserve
chairman, according to a slim majority of economists in a Reuters poll - but
most of them said current Fed Chair Janet Yellen would be the best option.
Just over half the 40 economists who participated in the
survey, taken in the past few days, tipped Fed Governor Powell to be appointed
chair by U.S. President Donald Trump when Yellen’s current four-year term ends
on Feb 1, 2018.
Powell, a lawyer and former investment banker, has served as
a member of the Fed’s Board of Governors since May 2012.
“The most continuity between Fed chairs would be Yellen to
Powell. Given where we are in the tightening cycle some consistency would be
welcomed by financial markets,” said Ryan Sweet at Moody’s Analytics.
“A regime change can be a little more rattling and unnerving
for markets.”
The next most likely choice was Kevin Warsh, who served as a
Fed governor during the financial crisis, with 13 forecasts. Yellen received
only four.
Also on the list of options, alongside being able to suggest
someone else, was Trump’s top economic adviser Gary Cohn, the former chief
executive of U.S. Bancorp Richard Davis, Columbia Business School’s Glenn
Hubbard, former head of BB&T John Allison and Stanford University professor
John Taylor.
They were all chosen by either one or no economist at all.
When asked who would be the best choice, around two-thirds
said Trump should allow Yellen to remain in place. Powell was in second place
with seven of 37 votes.
There is little daylight between his and Yellen’s thinking
and none of the economists polled said Powell would implement the most radical
change in policy.
Instead they said Taylor would make the biggest change.
Taylor is the author of an interest-rate forecasting model named after him in
which rates are tied to inflation and growth. In line with this rule, he has
long argued the Fed has kept rates too low for too long because of the risk of
unwanted inflationary pressures.
Expectations interest rates would go higher and at a faster
clip under his leadership got Warsh the second most votes.
“Warsh and Taylor might be hiking a bit more aggressively in
the current environment,” said James Knightley at ING.
The Fed has slowly increased borrowing costs and is expected
to raise rates again in December and follow that up with more hikes next year.
However, minutes from September’s Federal Open Market
Committee meeting revealed policymakers remained divided over the slow pickup
in inflation, raising doubts over the future path of interest rate hikes.
An inflation index closely watched by the Fed - the core PCE
price index - has been below the central bank’s medium-term target of 2 percent
for more than five years.
Trump said late last month he would make a choice “over the
next two or three weeks” on who will lead U.S. monetary policy. He has met with
four candidates, but his chief of staff said last week he was still some time
away from making a decision.
In July, Trump said he might decide to renominate Yellen for
a new four-year term, or turn to Cohn. He met with Taylor on Wednesday to
discuss the job.
“Probably depends on what Trump has for breakfast that day,”
said Scott Brown at Raymond James, when asked who the next chair would be.
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