Trump nominates Powell as Fed chairman

6 years ago - Published in Finance, Fundamental Analysis

Trump announces nomination of Fed board member Jerome Powell to be next chair of US central bank. A Fed governor since 2012 and former Treasury official under the George H.W. Bush administration, Powell will replace current Fed Chair Janet Yellen. Yellen was nominated in 2013 by President Obama. Her term as the central bank's first female leader expires in February.

“He is strong. He is committed. He is smart,” Trump said of Powell during an announcement in the White House Rose Garden on Thursday.

”Based on his record, I am confident that Jay has the wisdom and leadership to guide our economy through any challenges that our great economy will face,” the president said.

It will be the first time in four decades that a new president hasn't asked the current Fed chair to stay on for a second term.
Powell was among five candidates considered for the job. Also on the president's short list: former Fed governor Kevin Warsh, Stanford University economist John Taylor, the president's top economic adviser, Gary Cohn and Yellen.

The president praised Yellen as “a wonderful woman who has done a terrific job.”

Powell ticked off how the economy has become “stronger and more resilient” since the 2008 crisis. “I’m committed to making decisions with objectivity … in [the Fed’s] long-standing tradition of monetary policy independence,” Powell said.

Two immediate challenges face Powell once he is confirmed in the role: How quickly to raise interest rates and how to continue to safely unwind the Fed's hefty balance sheet.

Powell will also have to oversee how the central bank continues to shed some of the $4.5 trillion in investments it made in order to prop up the economy after the financial crisis. The Fed began the process of unwinding almost a decade's worth of stimulus investments in September.
For years, the central bank piled up purchases of Treasury and mortgage-backed securities, a strategy intended to stimulate the economy by reducing borrowing costs for everyone. At the time, it also reduced its benchmark interest rate to zero, and only began raising it in December 2015, seven years after the crisis.