President Trump made a safe pick for the next Fed Chair in Jerome Powell. This isn't the typical Trumpian move as he didn't make a non-traditional pick to replace Janet Yellen. We recently wrote about the possibility of John Taylor and viewed it as unlikely because Taylor would likely want to raise rates faster than the current Fed.
During the Presidential election, Trump highly criticized Yellen but he changed his tune in recent months and claimed that she was in the running to remain in position. Powell has been in lock step with Yellen during his five year tenure and is expected to continue the Fed's cautious approach to reversing the central bank's balance sheet and slowly raising interest rates.
“The economy is as close to our assigned goals as it has been for many years,” Mr. Powell said in June. If it continues growing as expected, “I would view it as appropriate to continue to gradually raise rates.”
Powell has never dissented on Fed monetary policy and in speeches has stayed with the board's consensus views. Because of this, some wonder why even bother changing from Yellen. The key difference may be his stance on regulatory policy. He has advocated for loosening some of the financial rules adopted by the Fed since the crisis. Furthermore, he has suggested softening the Volcker rule barring banks from using their own money to make more risky bets and easing some bank stress tests.
In the end, this is safe pick for new Fed chair and will be viewed positively by Wall Street. Powell has close ties to Wall Street as he worked in private equity for the Carlyle Group and the Global Environment Fund.