On Tuesday, the confirmation process for Donald Trump’s nominee as chairman of the Federal Reserve, Jerome Powell, started on Capitol Hill. Powell will come under “a lot more scrutiny” as he moves towards the position at the head of the US central bank, which is “one of the most powerful posts in the global economy”, says Heather Long in The Washington Post. He has been a governor at the Fed since 2012 and replaces Janet Yellen, whose four-year term ends in February.
At the hearing, Powell told a Senate panel that he expects the Fed to continue raising interest rates gradually to “support its twin goals of maximum employment and stable prices”, says Martin Crutsinger in the same paper. Under his leadership, the Fed would “consider ways to ease the regulatory burdens on banks while preserving the key reforms Congress passed to try to prevent another financial crisis”, says Powell.
There have been concerns, adds Long, about Powell’s close relationship with Wall Street. Although former Fed officials and acquaintances say he has great integrity and has been a “bipartisan consensus builder in Washington”, surprise has been voiced at his frequent meetings with bankers.
But then Powell is a lawyer, not an economist, who has spent most of his career at“huge global investment firms, says Adam Davidson in The New Yorker. “By near-universal agreement”, he is a “safe choice”. Bloomberg rates him as “precisely ‘neutral’”, meaning he is neither a dove (supportive of lower rates to boost employment) nor a hawk (an advocate of raising rates faster to slow the economy down and prevent inflation). But we need to start hearing more from him.
If the economy continues its current slow, steady trajectory, a “middle-of-the-road man of consensus” will guide the Fed well. But if “severe economic turbulence” lies ahead, the world needs to know how Powell thinks.
Powell’s appointment is just one of “a string” Trump is expected to make to the Fed’s board, says the FT; he will also be appointing a new vice-chairman. Powell will need to be strong, particularly in a crisis. “A domineering president with eccentric beliefs and a weak Fed can be a disastrous combination.”