In the end Donald Trump will get what he wanted, a ‘low interest rate person’ who also happened to be a ‘Republican.’ Jerome Powell is expected to replace Janet Yellen in an announcement later this week. If so, this means Trump will ensure that, while the stationary at the Eccles Building will change, the monetary policy guiding it likely will not.
The fact that, in naming Powell, Trump is picking an Obama-appointed Fed Governor for his most important nominations is itself quite fitting. While we have long known that bad monetary policy is bipartisan, Powell’s nomination serves as a particularly useful illustration of how little has changed in Washington since the Bush Administration.
Of course, just as Trump received his loudest applause from Washington for doing his best impersonation of his two predecessors, the President is already being praised for making a ‘grown up’ decision when it comes to the Fed. While his awareness optics likely prevented him from ever truly considering reappointing Janet Yellen – – the preferred choice of the DC and NY – Powell’s nomination ensures that Trump’s scathing criticism of the monetary orthodox has been predictably discarded alongside a number of his most exciting campaign promises.
Now we will see how else Trump squanders his historic opportunity to rearrange the Fed. The administration has signaled that its plans to form a policy consensus with its remaining Fed choices – as opposed to opening FOMC meetings into some truly spirited debate.
This post was published at Ludwig von Mises Institute on October 31, 2017.
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