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Unconfirmed reports from the U.S. media houses suggest that President Trump will pick the current Fed Governor Jerome Powell to head the U.S. Federal Reserve for next four years, replacing incumbent Janet Yellen, who term expires in February next year. She was among the three final but unlikely to get an extension to a second term from the President, who prefer a change.
Another top candidate for the Post is Stanford University Professor John Taylor who according to unconfirmed reports have been able to impress the President but his ideological bias may cost him the post. He famously proposed the ‘Taylor Rule’ and in the financial markets is widely considered as a synonym for a hawk.
On the other hand, a Republican appointed to the Fed in 2012 by Democratic President Barack Obama, Powell has earned a reputation as a non-ideological and pragmatic policymaker. While he hasn’t played a prominent public role in formulating and explaining monetary policy, he has generally backed Yellen’s cautious approach to withdrawing stimulus. U.S. Treasury Secretary Steven Mnuchin reportedly voiced his support for Powell.
President Trump is likely to announce his pick today before he leaves for his Asia trip on Friday.
While picking John Taylor as Fed chief would have been bullish for the dollar, picking Jerome Powell means status quo; hence bearish neutral for the dollar.
