Change yet continuity on jerome powell's nomination as us fed chief

Change yet continuity on jerome powell's nomination as us fed chief

Jerome Powell’s nomination as Fed chief will reassure U.S. and global markets

President Donald Trump’s decision to name Federal Reserve Board Governor Jerome Powell as his pick to head the central bank signals that the businessman-turned-politician has plumped for continuity even as he ushers in change. For a President whose first nine months in office have been marked by a succession of signature appointments to key posts ranging from a Supreme Court Justice to heads of federal regulatory bodies, the choice of the 64-year-old lawyer and former investment banker suggests that Mr. Trump’s business instincts won.

Mr. Powell, who was appointed by President Barack Obama as Fed Governor in 2012 and worked alongside the incumbent Chair, Janet Yellen, over the past five years, will represent policy continuity in the monetary management of the world’s largest economy. After all, with the economic engine ticking over nicely and creating jobs, and the markets buoyant, there was little reason for Mr. Trump to run the risk of choosing someone who may have altered the calibrated approach the Fed has adopted in overseeing the recovery from the global financial crisis. Two of the other short-listed probables — Kevin Warsh and John Taylor — had both been critics of the Fed’s actions. That Mr. Powell had served in the Treasury Department during the George H.W. Bush administration means that he will, in all likelihood, receive bipartisan backing in the Senate.

Emerging markets, including India, can heave a small sigh of relief with Mr. Trump’s choice, given the influence the Fed’s interest rate decisions have on global capital flows. Delivering a lecture on ‘Prospects for Emerging Market Economies in a Normalising Global Economy’ last month, Mr. Powell acknowledged the challenges these economies faced as a result of the ‘normalisation’ of global financial conditions — shorthand for the slow but sure reining in of the easy money conditions that had undergirded policy responses to the financial crisis.

And crucially, he stressed that “the best thing the Federal Reserve can do — not just for the United States, but for the global economy at large — is to keep our house in order through the continued pursuit of our dual mandate” of fostering economic conditions that achieve both stable prices and maximum sustainable employment. But it is not only the stability aspect that won Mr. Powell the nod. A former Carlyle Group partner with a stated keenness to adopt a light-touch approach to regulation, he is expected to be closely aligned to Mr. Trump’s positions on easing regulatory oversight of big banks and financial markets. And with other top positions at the central bank to be filled by the President soon, Mr. Powell could end up overseeing a Fed that reflects Mr. Trump’s political leanings as well.