Hi. We're here with Carl Tannenbaum, Chief Economist of Northern Trust. Carl, great to see you.
Good to be with you.
So Jerome Powell has been named the next chair of the Federal Reserve. What are your impressions?
He's a very competent individual. He's already been at the Fed for five years so he's very familiar with the organization, the people who work with him. His background's a little different from some other Fed chairs. He does not have a PhD in economics. I don't find that in shortcoming because the Fed has to understand the dynamics of how the financial markets will work in reaction to their policies and economic developments.
I think he's proven himself to be a good listener and a good leader. And because he has been very close aligned with current chair, Janet Yellen, it's unlikely that we're going to see much of a change in the trajectory of monetary policy.
So what really distinguished him from other potential nominees?
Some of the others who are being contemplated for that role, we're advocating, quite publicly, for a very different approach to interest rates. In particular, to have them much higher than they are today. Both John Taylor and Kevin Warsh, had advocated for the Fed to take out an insurance policy against financial excess, by making borrowing a little bit more expensive.
The markets probably would not have been set up well for that and certainly, it would not have been the best thing for the federal budget. So I suspect that those in the White House who were involved in the search, coalesced around Janet Yellen and Mr. Powell as more conventional candidates.
So what do you expect the new Fed, or the next Fed, to focus on-- de-regulation or what would you see?
I think, as I mentioned earlier, that the monetary policy trajectory is fairly well set. And where Mr. Powell may [? seem ?] to make his mark, at least initially, is in the realm of regulation. Certainly, there is a tendency towards taking a careful look at the regulations that were put into place after the financial crisis.
The Federal Reserve itself was not entirely in favor of everything in the Dodd-Frank Act and so that's where Mr. Powell may start in trying to find rightsizing opportunities, that wouldn't compromise financial stability, but may take a little bit of a burden off the financial system.
What do you see as the biggest challenge for Mr. Powell as he takes the helm?
Well, there are going to be two. He's going to be operating very short-handed because there's still a number of roles on the Board of Governors that are open. And you don't just need people voting, you need them to actually do work within the Fed. So filling those positions is going to be very important.
And I wonder, if early on in his tenure, he's going to be faced with a difficult choice-- if asset prices continue to go up and people continue to blame the Fed for being too easy, he may have a difficult choice as to whether raise rates preemptively in order to head off another financial crisis.
Well, Carl, thanks for your time. You're very welcome.