The New Year will bring a new Federal Reserve Chair, and President Donald Trump can hardly wait. "I'll soon announce our next Chairman of the Federal Reserve, someone who believes in lower interest rates by a lot," said Trump in his White House address this week. Trump has made no secret of his disapproval of outgoing Fed Chair Jerome Powell, accusing Powell of being far too hesitant to reduce interest rates. Even after the Fed cut rates three times since September, Trump said it wasn't nearly enough, noting the December cut "could have been double."
President Trump says he is interviewing multiple candidates to replace Powell, whose term officially ends May 1. But White House chief economic adviser Kevin Hassett is considered the favorite for the job. Hassett is certainly more aligned with Trump's thinking, but that might create more complications. "If he's a good Fed Chair, he is going to sometimes do what the president doesn't want him to do, and then we're gonna see how that looks," says Richard Rosso, certified financial planner. "Because then Trump would be like, 'how dare you, I put you in there and now you're not lowering the rates the way I want'...so I don't know if we're in for a whole new level of drama."
Right now, the conditions for more rate cuts appear to be ripening, with employment a bit sluggish and the latest inflation reading coming in better than expected. But Rosso warns the Fed should still tread cautiously, and wait to see the full impact of Trump's economic policies over the next few months. "I'm talking about small business spending, people getting refund checks, higher standard deductions, more money in taxpayers' pockets," he says. "By the way, these are all really good things...but sometimes, really good things heat up inflation."
Regardless of who gets the job, it will bring enormous pressure. "Everybody in the media, especially the financial media, is going to question the objectivity of this Fed Chair," says Rosso. "This Fed Chair is going to be under scrutiny unlike any other Fed Chair we've ever had."
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