Trump names Jerome Powell to replace Yellen as Fed chair

President Donald Trump on Thursday nominated Jerome H Powell to chair the Federal Reserve, not giving Janet L Yellen a second term but naming a replacement who is not expected to deviate from the current monetary policy if the economy continues its steady growth.

''He's strong, he's committed, he's smart,'' Trump said in the White House Rose Garden, where he introduced Powell as his choice for the Fed. Using Powell's nickname, the president said, ''I am confident that with Jay as a wise steward of the Federal Reserve, it will have the leadership it needs in the years to come.''

According to Bloomberg, the president has chosen a loyal ally of Yellen, the outgoing chair. At first sight, the appointment signals business as usual in monetary policy, rather than the unconventionality that some of the other candidates stood for.

Less certain is where Powell would lead the Fed if the economy falters, says The New York Times. Powell, a member of the Fed's board of governors since 2012, has consistently voted with Yellen to slowly raise interest rates and sell off assets that the Fed bought up in the wake of the severe recession of 2008 and 2009. Colleagues consider him a centrist and pragmatist.

But though well qualified, he lacks the deep background in economics and academic weight of some of his predecessors, as experts have pointed out in various media, and he has expressed scepticism in the past about the unconventional measures that the Fed took after the recession.

Moreover, there are vacancies in the committee which means further appointments are coming - choices that could make his job easier or harder.

Powell could also depart from the Fed's current trajectory when it comes to regulating banks and other financial institutions - rules Trump has said should be loosened.

The nominee offered little hint of his thinking during brief remarks in the Rose Garden. He said the nation's economy has made ''substantial progress toward full recovery'' since the financial crisis and that banks are in far better shape. ''I will continue to work with my colleagues to ensure that the Federal Reserve remains vigilant and prepared to respond to changes in markets and evolving risks,'' he said.

Powell is a Republican with strong roots in the party's establishment and in the financial industry, a lawyer by training and investment banker by trade – some observers have expressed concern that he lacks an economics degree.

As Fed chair, a position some consider the second most powerful post in government, he would be the voice of an institution that is charged with keeping the economy on track by adjusting interest rates that influence the decisions of millions of Americans as well as markets around the world.

In replacing Yellen, Trump has broken with precedent. The previous three Fed chairs were reappointed, in each case by a president of the opposite political party.   Trump on Thursday said that he respected Yellen and called her ''a wonderful woman who has done a terrific job''.

In a statement, Yellen congratulated her chosen successor and said she was ''confident in his deep commitment to carrying out the vital public mission of the Federal Reserve''.

The Fed under Yellen's leadership has sharply reduced unemployment while maintaining control of inflation, coming as close to achieving its congressional mandate as at any time in its history, according to NYT.

Her prospects to be re-nominated momentarily lifted when the president agreed to meet with her on 19 October at the urging of Gary D Cohn, Trump's national economics adviser who himself was once a top candidate.

Trump came away genuinely impressed with Yellen, according NYT citing a person briefed on the process, but a speech she gave in Jackson Hole, Wyo, in favour of financial regulation damaged her chances given the White House agenda of cutting red tape and freeing up financial firms.

White House officials said Trump was impressed with Powell's combination of government and private sector experience. Ultimately, Trump, who as a real estate developer benefited from cheap credit, came down for Powell, whom he hopes will deliver lower interest rates.

The position requires Senate confirmation, but Powell is likely to attract broad support from the Republican majority. He won some Democratic votes when he was confirmed as a Fed governor in 2012, and when he was confirmed again in 2014.

The Federal Reserve has embarked on a path of gradually raising its interest rate from ultralow levels meant to stimulate the economy after the financial crisis. The Fed is expected to raise its benchmark interest rate again in December, likely Yellen's final act as chair.

Under Powell's leadership, the Fed will presumably continue on its projected path of raising its interest rate three more times next year, as well as continuing to pare back its massive balance sheet of Treasury notes and bonds.

Powell remains a centrist voice in the Fed's internal debates, arguing for the Fed to end its stimulus campaign at a slow and steady pace. Over the last year, that has placed him solidly among the majority led by Yellen.

But some argue that there is more uncertainty surrounding Powell's approach than for other recent Fed chairs. Lewis Alexander, chief United States economist at Nomura Securities, said it was unclear how aggressive Powell would be in responding to an economic slowdown.

''I don't think it's right to think of Powell as a Yellen clone,'' Alexander said. ''In terms of the core issues of monetary policy, we just don't have much of a baseline for him.''

Powell would be the first Fed chair in four decades who does not have a degree in economics - meaning his opinions may not be as fully formed as some of his predecessors. He also lacks a body of academic work analysts could parse for his views.

As a member of the Fed's board of governors, Powell raised concerns in 2013 that the Fed was trying too hard to revive economic growth with its massive bond-buying programme.

The Fed announced in September 2012 that it would launch a third round of bond buying, purchasing $85 billion a month in Treasuries and mortgage-backed securities until economic conditions improved to its satisfaction. The programme was backed by Ben Bernanke, then Fed chair, and Yellen, then the vice chairwoman, who argued the Fed had not done enough to reduce unemployment.

The president has three more open seats on the board of governors, and may have a fourth if Yellen decides to step down from her position on the board as she departs as chair.

Powell attracted the attention of the Obama administration in 2011, when he worked behind the scenes to persuade congressional Republicans to raise the debt ceiling. The next year, President Barack Obama nominated Powell to the Fed.