» Prospects: Trump’s Fed Decision Economics

Prospects: Trump’s Fed

Posted February 22, 2017 by rvillareal

  • In any administration, there are surprises on appointments. Trump administration has already surprised us and may do so regarding their choices for the Fed.
  • Appointing the regulatory vice-chair seems to be the first priority, given the importance to the White House and Congress of reforming regulation and even dismantling Dodd-Frank. One of the other two vacancies could even be filled by a hard money advocate.
  • One of three appointed could end up being chairman next year, assuming Yellen stays on as a Governor. Yellen is more likely to step down if not reappointed to the Chair.  In that case, Trump can appoint a new Chair.  Given his preference for advisors who have been successful in business, his choice may be someone less academically oriented that the two previous Fed chairs.
  • Like Nixon did with Burns and Bush did with Bernanke, Trump might want to take the potential chair out for a “test drive,” and appoint him to a position at the White House so they can get comfortable with one another.
  • What worries the markets is that the next Fed chair might become more tolerant of inflation and that we discover we have a Burns rather than a Volcker.
Not yet a Decision Economics member?  Click here to register for a FREE 30 day trial.  

If you are already a member, click here to login.