Trump considers Cohn, Yellen for Fed chair job

PRESIDENT Donald J. Trump said he may reappoint Federal Reserve Chair Janet Yellen to a second term at the helm of the US central bank, while indicating that White House aide Gary Cohn was also a top contender for the position.

Trump told the Wall Street Journal in an interview on Tuesday that Yellen, 70, whose term as chair expires in February, “is in the running, absolutely,” adding that he respected and liked her personally. “I’d like to see rates stay low. She’s historically been a low-interest-rate person,” he told the newspaper, according to its website.

Sticking with the incumbent Fed chair would be in keeping with White House tradition. Paul Volcker, Alan Greenspan and Ben Bernanke were all re-appointed by presidents from parties other than the one that originally nominated them. Such choices reflect the importance of policy continuity and financial market stability to any president’s economic agenda, and the fact that switching Fed chairs carries a risk that the White House will own.

“This one is up to the president and he has made it clear: He likes low interest rates. Why would he want to focus on a hawk” or someone more inclined to raise rates faster than Yellen? said Mark Spindel, co-author of a book about the Fed that will be published in September.

Trump had previously expressed his admiration for Yellen in a Wall Street Journal interview in April. She has declined to comment about her future at the Fed beyond stating an intention to serve out her current term, which expires Feb. 3.

The Fed chair has overseen a gradual tightening of interest rates that has supported continued US job growth and gains in asset prices. The S&P 500 stock index added 0.3% Tuesday to close at a record high. Fed models suggest the economy will continue to do what it has done in recent years and expand at around a 2% pace.

Fed officials began a two-day policy meeting in Washington earlier on Tuesday and are expected to leave borrowing costs unchanged when they announce their decision at 2 p.m. on Wednesday.

Politico had reported earlier this month that the Fed job was Cohn’s if he wanted it, citing unidentified sources. But Trump hasn’t indicated that he had ruled Yellen out.

“I like her; I like her demeanor. I think she’s done a good job,” Trump said, according to the Journal.

GARY COHN
Cohn, 56, director of the White House National Economic Council, was present during the interview, according to the Journal story. Trump said that “I’ve known Gary for a long time, but I’ve gained great respect for Gary working with him, so Gary certainly would be in the mix.” The former Goldman Sachs Group Inc. executive has indicated that he’s happy in his current position.

“Many people in the market, I don’t think they wrote off Yellen completely, so I don’t think this comes as a huge surprise to investors,” said Roberto Perli, a former Fed official who’s now head of global monetary policy research at Cornerstone Macro LLC in Washington. “Policy is very unlikely to change drastically, no matter who gets there,” Perli said. “The Fed chair is important, but it’s not an emperor.”

Trump indicated that two or three other contenders, whom he declined to name, are in the running. He said he probably wouldn’t announce the decision until the end of the year, the newspaper said. The nomination requires approval by the US Senate.

Other potential candidates include Kevin Warsh, a Fed governor from 2006 to 2011 who has since become a vocal critic of the central bank; Fed Governor Jerome Powell, who’s the lone Republican currently serving on the Board; and Glenn Hubbard, dean of Columbia University’s business school and President George W. Bush’s chief economist from 2001 to 2003. — Bloomberg