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Jerome H. Powell Nominated As Fed Chair – Analysts React

Yesterday, Jerome H. Powell was nominated by President Trump to take the place of Fed Chair, Janet Yellen. All the pundits are wondering what this means for Federal Reserve policy in particular for potential rate hikes and balance sheet unwinding. Below are snippets from what analysts are saying about how Jay Powell would change (or not) current Fed policies. The overall consensus is that Powell will differ on regulation but not much on FOMC actions. Bloomberg has a good piece on the background to the decision, which readers can find here.

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Jerome H. Powell

Big banks think Jerome H. Powell will continue Yellen's policies

Morgan Stanley

On his fundamental economic views, Jerome H. Powell has been in line with the consensus FOMC thinking, with his speeches indicating that he's fully on board with themes of lower potential growth and lower neutral interest rates. As such, his leadership is not likely to represent a structural shift in terms of the key views shaping the medium-term monetary policy outlook.

HSBC

With Mr. Jerome H. Powell as Chair, we believe the outlook for Fed policy would remain the same. We expect that the FOMC will raise the federal funds rate 25bp in December, an increase that is already widely expected in financial markets. With inflation staying low and with balance sheet shrinkage tightening financial conditions, we expect the FOMC to raise the federal funds rate only once in 2018, rather than three times as indicated by the FOMC’s median projection.

Goldman Sachs

We do not think that the choice matters greatly for the near-term path of policy. In particular, we think Mr. Powell is broadly on board with the currently expected path of policy, provided growth stays above trend and inflation moves sideways to higher from here.

BNP

Jerome Powell is the continuity candidate, having been a Federal Board governor for five years. Powell is not known for being unconventional on monetary policy and he gave a speech in June this year that was essentially “on message” and mainstream in its outlook. He will be viewed as a centrist with the likelihood of no major changes for the Fed’s recent policy stance, but he is more dovish than the other major contender, economist John Taylor.

UBS

As chair, Powell is likely to maintain a consensus-based approach to setting policy, following the template established by his predecessors Ben Bernanke and Yellen. Although Powell is not a trained economist, he has developed a deep understanding of macroeconomics and monetary policy. He is well liked and respected on the FOMC and understands its processes. That combination means he should be able to create committee consensus fairly easily.

Deutsche Bank

Late last night we also got official confirmation that Jerome Powell will be the next Fed Chair, a decision which appeared to be well flagged in the last couple of weeks. In our economists’ report last week they argued that a Powell-led
Fed makes most sense. They highlight that Powell would provide the highest degree of continuity to current policy and as such the market should take the announcement largely in stride, keeping financial conditions easy and providing little disruption to an economy that is experiencing solid growth. In addition, the team also highlight that Powell has now had five years’ experience working inside the Fed, and by all reports very effectively on both macroeconomics/monetary policy and on regulatory policy. Evidence from speeches also suggest that Powell would prove to be a more than capable communicator.

CLSA Chris Woods

Marketwise, the decision is a non-event for now though there is a difference in the American central bank being run by a lawyer rather than an academic.

So all the experts say that Jerome H. Powell will be the same as Yellen on rate hikes, since the consensus is sometimes wrong, maybe we will see some differences in the future. The only way to know is to watch and wait, as the future is uncertain and the end is always near.

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