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Trump Advisors Lean Toward Taylor or Powell for Fed

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President Donald Trump’s closest advisors are steering him toward choosing either Stanford economist John Taylor or Federal Reserve Board Governor Jerome Powell to be the next Fed chief, according to several people familiar with the process.

Trump has not yet made up his mind, the people said, though he has publicly promised to announce a decision soon. Besides Taylor and Powell, his shortlist of five candidates also includes the current Fed Chair Janet Yellen, former Fed governor Kevin Warsh and National Economic Council Director Gary Cohn.

On Thursday, Trump conducted his final interview with the Fed chair contenders, sitting down with Yellen at the White House for half an hour. Yellen, whose term as central bank chief ends on Feb. 3, came across as polished during their meeting.

A portrait of deliberations on the next Fed chairman emerged from seven people familiar with the process who shared information on condition of anonymity. The president’s own preferences aren’t yet clear.

An announcement from Trump is unlikely to come this week, according to two White House officials. He hasn’t yet had time to step back and assess all the information about each candidate, one person familiar with the process said. He’s expected to unveil his selection before he leaves Nov. 3 for an 11-day trip to Asia and Hawaii.

Interviews With Pence

Vice President Mike Pence and his aides and Treasury Secretary Steven Mnuchin are lining up behind appointing either Taylor or Powell, according to two people familiar with the process.

All the candidates performed well in their meetings with the president over the past several weeks, according to two people. Cohn never officially interviewed with Trump because the president already knows his top economic adviser quite well and doesn’t think it is necessary, they said.

The interview with Yellen was attended by Mnuchin, White House Chief of Staff John Kelly, White House Personnel Director Johnny DeStefano and special assistant to the president Andrew Olmem.

Pence wasn’t present for Yellen’s interview, though he did sit in on Taylor’s session with the president. He also met separately with Powell and Warsh at Trump’s request, according to a person familiar with the matter.

Yellen has overseen a delicate transition in U.S. monetary policy. She ended quantitative easing, raised the benchmark lending rate off zero, and has now started to unwind the central bank’s $4.5 trillion balance sheet with little impact on the economy or financial markets.

She has not presided over a recession, unlike her three predecessors. Unemployment has declined on her watch to 4.2 percent from 6.7 percent, while inflation is low at 1.4 percent. U.S. stock markets have hit record highs — a favorite observation by the president — and interest rates remain unusually low in an expansion now in its ninth year. Her term ends in February.

Yellen fared well during her interview with Trump and is respected by the president and other administration officials including Mnuchin. Even so, she has no constituency among Trump advisers in favor of her reappointment, and she also faces questions from some Republicans in Congress about her stewardship of the Fed.

Congressional Republicans

On Thursday, Senate Banking Committee Chairman Mike Crapo said Yellen had been too slow to raise rates, though he declined to weigh in on whether she should get another term as chair. The nomination would require confirmation by the Senate.

Representative Warren Davidson, an Ohio Republican and member of the conservative House Freedom Caucus, is circulating a letter for colleagues on the House Financial Services Committee to sign against Yellen’s re-appointment.

Warsh and Powell were interviewed at the White House last month. Some conservatives have concerns about Powell, a member of the Fed board of governors who was appointed by former President Barack Obama.

Warsh, meanwhile, lacks support from Mnuchin, according to two other people familiar with the process, though they would not say why. His tenure on the Fed board has been criticized by a diverse group of economists ranging from Scott Sumner to Nobel laureate Paul Krugman.

Taylor impressed Trump after an hour-long meeting at the White House last week, several people familiar with the matter said.

Trump has always been partial to hiring people with whom he has a good relationship. However, Trump told the Wall Street Journal in July that he would “like to see rates stay low,” and Taylor is the namesake of a well-known monetary policy rule that would generally call for higher interest rates.


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