Search for a New Fed Chairperson Continues: Another Trump Thriller

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Search for a New Fed Chairperson Continues: Another Trump Thriller

Photo: Bubble Argentina.

Photo: Bubble Argentina.

Photo: Bubble Argentina.

Photo: Bubble Argentina.

Lawrence Jia, International/Domestic News Editor

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With current Chairwoman Janet Yellen’s term ending this coming February, President Trump must find a suitable replacement to lead the United States’ central banking system. Arguably one of the most powerful and influential jobs in the world, the Federal Reserve chairperson oversees twelve branches of the Fed and determines policy to manage inflation and curb unemployment. After surviving and recovering from the second-largest recession in American history occurring just a decade earlier, stimulus policy from the Obama administration is signaled to reverse. Both a slow increase in the Fed’s target interest rate and an offloading of the Fed’s balance sheet seek to enter a more contractionary, pre-recession monetary policy. However, can the Trump administration, well-known for broadcasting its appointment process for Cabinet and Supreme Court positions, shift the market’s confidence in Fed leadership?

The diversity in Trump’s list of candidate choices is unusual for a Fed chairman nomination. Most presidents first choose a policy position before considering potential chairpeople. However, Trump’s final list of candidates range from the sitting chairwoman to a Stanford economist who has been consistently and highly critical of the current Fed’s policies. After narrowing his list of five potential candidates, President Trump is now considering three individuals to “head the Fed.” First is Janet Yellen- the current Federal Reserve chairwoman, Ivy League-educated economist, and perhaps most importantly, appointed by President Barack Obama. With her at the helm of the Fed, former chairman Ben Bernanke’s stimulus-based monetary policy was continued. More recently, Yellen has signaled in the past quarter of slowly raising interest rates and reducing the Fed’s balance sheet. Jerome Powell, a sitting Governor on the Federal Reserve’s Board, has supported Yellen in most of her decisions while John Taylor, a Stanford economist, has opposed Yellen’s policies at every turn. Taylor has criticized the continuation of the Fed’s stimulus policy and instead would like to hasten to enter contractionary policy.

What is odd about this nomination process is Trump’s sheer transparency. Trump appeared on Fox News asking the host’s opinion on the appointment process. He even asked the opinions of many Republican congresspeople on their opinion for the chairperson position. This, coupled with the unusual range of candidate choices, raises a question: will Trump attempt to undo any remnants of the Obama administration or is he trying to gain insight from a variety of different perspectives?

Many Congresspeople and economists have come out in favor for the reappointment of Janet Yellen, the sitting chairwoman. Every chairman since the 1950’s has been reappointed for a second term, and Yellen is both competent at her job and familiar with the Federal Reserve. But, if Trump wants to simply undo Obama-era policy and replace Yellen, he must choose Jerome Powell. The Federal Reserve has been and must continue to be a nonpartisan institution that values economic growth and stability over bickering in politics. Especially with the Fed already signalling at raising interest rates and reducing the balance sheet, Trump must not inflame the market with the more radical choice of John Taylor. The reappointment of Janet Yellen or at least the continuation of her policy with Jerome Powell is essential to maintain the integrity of the Fed and its history in nonpartisanship.

But, ultimately, it is up to President Trump to decide.

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Lawrence Jia, International/Domestic News Editor

Lawrence Jia, a junior at Maggie Walker, has served as the International/Domestic News Editor since his freshman year. He is thrilled to pursue his interests...

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