Fri, Nov 03, 2017 - Page 10 News List

Fed sticks to course ahead of chair pick

NO SURPRISES:Sources said US President Trump was not expected to make a last-minute change to his likely ‘least controversial’ pick of Jerome Powell for US Federal Reserve chair


US President Donald Trump was yesterday expected to nominate Jerome Powell as the next head of the Federal Reserve, putting his own stamp on the leadership of the US central bank while signaling continuity on monetary policy.

Trump’s decision, scheduled for the afternoon, concludes a months-long process in which he considered five finalists, including Fed Chair Janet Yellen, before settling on Powell, who has served as a Fed board member since 2012.

Powell’s name has been circulated as the top contender for more than a week.

A source with knowledge of the process said that no surprises were expected yesterday, despite Trump’s reputation for weighing decisions up to the last minute and his praise on Wednesday of Yellen, who was nominated by former US president Barack Obama. Her term as Fed chair expires in February, although she is entitled to remain a Fed board member until 2024.

“I think Janet Yellen is excellent,” Trump told reporters during a meeting with his Cabinet, after declaring his intention to announce his choice the next day.

Asked if she was his pick, Trump said: “I didn’t say that.”

He predicted people would be “extremely impressed” with the nominee, who will require US Senate confirmation.

Powell, 64, has supported Yellen’s general direction in setting monetary policy and in recent years has shared her concerns that low inflation justified continuing with a cautious approach to raising interest rates.

Commerzbank AG economist Bernd Weidensteiner said a Powell pick would mean that Trump had chosen the “least controversial” person for the job.

“Under his chairmanship, markets would expect business as usual — which they obviously like,” he said.

Powell is expected to pursue a policy of cautious deregulation of the financial sector, potentially freeing smaller banks from some of the rules imposed in the wake of the financial crisis of 2007 and 2008.

Powell, who has been a Fed board governor since 2012, played a key role in drafting new bank regulations after the crisis and will likely offer more continuity for Wall Street than other candidates, analysts said.

Meanwhile, the Fed on Wednesday kept its key policy interest rate unchanged and downplayed possible effects from hurricanes on the US economy, saying it was growing at a “solid pace.”

Overshadowed by Trump’s looming announcement of his pick to lead the central bank starting next year, the Fed stuck to the expected course, holding the benchmark lending rate at 1.0 to 1.25 percent.

The Fed upgraded its view on US growth, which is the best hint of what it will do next month, when it is widely expected to raise rates at its final meeting this year to head off inflation it sees rising only in the medium term.

The policy-setting Federal Open Market Committee’s (FOMC) statement provides few hints for markets about the plan for next month’s meeting, other than a single added word, saying economic activity has been rising at a “solid” rate, rather than “moderately” as it was described in September.

As usual, the FOMC pledged to monitor inflation closely and repeated the expectation that the key price measures will approach the Fed’s 2 percent target “over the medium term,” as the economy continues to expand amid only “gradual adjustments in monetary policy.”

Additional reporting by AFP

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