Jerome Powell approved

Background

The Federal Reserve System (also known as the Federal Reserve or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913. The main goal behind establishing the body was to create a central control of the monetary system that will prevent financial crises. In the event of a financial downturn, the Federal Reserve steps in to provide key aid. Over the years, the Federal Reserve a played a key role in saving the American economy (and in turn the global economy) from imploding. It’s roles and responsibilities were expanded after the Great Depression, that caused a global meltdown. The timing of the Great Depression varied across nations; in most countries it started in 1929 and lasted until 1941. It resulted in international trade being reduced by 50% and unemployment rose.

Jerome Powell approved

Analysis

On November 2017, Trump made the announcement that he had chosen Jerome Powell for the next Chair. If he is confirmed by the Congress, then he will take over from Yellen in February 2018. “He’s strong, he’s committed, he’s smart. I am confident that Jay has the wisdom and leadership to guide our economy through any challenges,” Trump said, introducing his appointment in a short address outside the White House.

On January 2017, with a vote of 84-13 in favor Jerome Powell was confirmed by US lawmakers. Powell is a trained lawyer who has in the past worked for top investment companies like Carlyle Group, where he was the partner. Media reports have revealed that he estimated to be worth between $20 million and $55 million. Politically, he has been recognized as a  Republican.

Jerome Powell approved

Assessment

Our assessment is that Powell, a Republican, is a safe choice for the current administration. He will  provide continuity for existing US monetary policy, and under his administration, the Federal Reserve is not expected to rattle markets. We believe that Powell will have three challenges. The first one will be the pressure to ease regulation; the second one will be to normalize interest rates and the third one will be to move towards a planned balance sheet normalization. Powell will also have to contend with Trump’s tax reforms as it comes with $1.5 billion tax reduction. While this move will substantially boost the economy, which is now close to full employment, it is also expected to increase the debt significantly. 

Sources: Synergia Foundation