Trump’s pick for Fed chair likely to stay the course

The nomination of Jerome Powell does not change our views on interest rate hikes

James OngTime to read: 2 min

On Thursday, President Donald Trump nominated Jerome Powell to serve as the next chair of the Federal Reserve Board (Fed). The news was expected as consensus over the past few weeks had increasingly showed Powell as the frontrunner. By the time of the announcement, bond markets had already priced in a Powell appointment, and we saw very little volatility or market reaction to the nomination.

Powell, who sits on the Fed Board of Governors, has been viewed as the safe choice and the candidate most in line with current Fed Chair Janet Yellen’s views. We expect he will

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Why is inflation surprisingly low?

Hint: volatile and stable core prices have slumped, but rebound is likely

James OngOver the past five months, the US has experienced a string of surprisingly low inflation reports. After peaking at 2.7% in February, annual growth in the Consumer Price Index (CPI) dropped to 1.7% by July.1 More importantly, “core” inflation, which removes the volatile food and energy components, fell from 2.2% to 1.7% over the same period.1 Because core inflation is an important determinant of bond prices and US Federal Reserve (Fed) policy, we believe it is important for investors to understand what drives it and how it is likely to evolve in the future.

There are two main drivers of core inflation

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