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Jerome Powell becomes the new chair of US Federal Reserve
By admin February 5, 2018

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After the former US Federal Reserve chair, Janet Yellen, left office, Jerome Powell will be sworn in today. Since the nomination of Powell at the end of last year, what policy the Federal Reserve will adopt has been a subject of concern.

The Federal Reserve is responsible for fulfilling the responsibilities of the U.S. Central Bank, whose core governing body is the Federal Reserve Board. In early November of 2017, President Donald Trump nominated Powell to replace the current chair, Janet Yellen. On January 23rd, when Powell’s personnel case passed in the Senate, the nomination was finalized.

Jerome Powell, who has a bachelor’s degree in political science from Princeton and a law degree from Georgetown, is the first Federal Reserve chair without a Ph.D. degree in economics in nearly 40 years. Previously, he has been a lawyer and has held important positions in investment banking, private equity, and think tanks.

In 1990, Powell became Treasury official under the George H.W. Bush administration and was promoted to Deputy Treasury Secretary in 1992. He left the government as an executive director of the Banker’s Trust in 1993, then worked for a large private equity fund before opening an investment firm of his own.

In 2002, Powell was nominated by President Barack Obama to be the governor of the Federal Reserve. Although Powell is not an economist, the long-term financial market background and the rich experience in different fields have provided him with experiences in balancing the interests and opinions of all parties. These work experiences may bring different perspectives to the Fed’s decision-making.

Last November, Powell made it clear during a Senate hearing that, if approved as Fed chair, he would lead the Fed to maintain the current pace of incremental interest rate hikes, continue to push for shrinking the balance sheet and stick to the core reform measures introduced after the financial crisis.

On the eve of Powell’s inauguration, the Federal Reserve held a monetary policy meeting on January 30th and 31st, announcing that the federal funds rate would remain unchanged, ranging from 1.25% to 1.5%. The Fed also said it expected to keep pace with incremental interest rate hikes.

The Fed said the current U.S. economic situation was generally optimistic, taking into account the labor market and inflation rates. And it also decided to keep the federal funds rate unchanged and monetary policy loose to support the labor market and push the inflation rate back to 2%. In 2017, the Fed raised interest rates 3 times, 25 basis points once. The market had predicted that the Fed’s rate hike in 2018 would be in line with 2017.

However, after Powell’s assumption of the Fed chair and Yellen leaves, there will be multiple vacancies on the Fed’s board. Now, the question is who can get into the Federal Reserve Board? A large part of that decision is in the hands of President Trump, and of course, the new members of these committees will affect the policy of the Fed’s future direction.


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