One of those things which most pundits predicted when President Trump secured his less than universally expected election victory was that there would be sweeping changes made in the area of financial regulations and taxation policy. The reality has been that progress of any sort, in any area, has been pretty thin on the ground. This isn’t the place to rehearse, yet again, the reasons why the Trump White House may have fallen short of delivering many of the things promised during the last Presidential campaign.
Suffice it to say that those with an eye on the currency exchange markets have been looking out for an event or initiative which would clearly signpost a shift in direction. That event may finally arrive in the next few weeks, when President Trump announces his pick as the new head of the Federal Reserve.
Since President Trump was elected in November the Federal Reserve has more or less maintained the policy which has held sway for the best part of the last, post-crash, decade – low interest rates and a fairly ‘hands-on’ approach to bank regulation. This approach, and in particular the approach of the current chair, Janet Yellen, was heavily criticised by President Trump prior to his election. Although this criticism has stopped since the inauguration, the fact that Ms Yellen is up for renewal in 2018 has led most experts to expect that President Trump will replace her with someone more likely to pursue his own light touch regulatory agenda. The fact that this will lead to a rise in interest rates and more freedom for the banks is bound to have a significant impact on the strength of the dollar against a basket of other currencies. To say anything more is to indulge in speculation. Tempting though that may be, the best we can do at this stage is to take a quick look at the various individuals thought to be in the running for the post of chair of the Federal Reserve:
Director of the National Economic Council
The NEC is actually leading the search for the next chair of the Federal Reserve, but Mr Cohn is tipped as a leading contender. Despite not being a trained economist, his track record as a Goldman Sachs banker has given him extensive experience of the workings of both banks and the markets.
Dean of Columbia Business School
Having served as one of George W Bush’s Economic Advisers, Mr Hubbard was tipped for the role of Federal Reserve chair if Mitt Romney had become President in 2012. Writing in the Wall Street Journal in June of this year, he stated that Federal Reserve governors should be selected on the basis of ‘varied life experiences’.
Formerly Governor of the Reserve board
Kevin Warsh was on the board of the Federal Reserve during the crash, and acted as a conduit to Wall Street for the chair of the Reserve, Ben Bernanke. Since then, he has been very critical of the central bank and doubtful of the effectiveness of quantitative easing.
Professor at Stanford University
John Taylor wrote the so-called ‘Taylor Rule’ for setting interest rates. Until now the Federal Reserve has resisted calls to use such policy rules as they would curtail the freedom to make decisions. Mr Taylor previously held government posts during the administrations of George Bush and George W Bush.
Governor on the Federal Reserve Board
Originally appointed by Barack Obama, Mr Powell came from a background as an investment banker and partner with the Carlyle Group. Regarded as occupying the centre ground between those who would introduce more or less regulation, his fields of expertise include financial markets and regulation.