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

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

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 continue with the Fed’s plan to gradually raise interest rates and, therefore, Invesco Fixed Income’s outlook for a December interest rate hike and two or three hikes in 2018 remains unchanged.

Unlike Yellen or previous Fed chairs, Powell’s background is in corporate law and investment banking rather than economics, thus he may rely more heavily on Fed governors than past chairs. President Trump still has three governor nominations remaining, including vice chair, and these candidates may be better indicators of the Fed’s future leanings, as these individuals could lead Powell toward a more hawkish position.

Powell is also thought to be more pro-business than Yellen, and some observers expect to see a trend toward financial deregulation. While we may see minor changes such as deregulation for small banks, however, Powell has been largely supportive of post-crisis regulations, and we do not anticipate an overhaul of this framework.

With contributions from Megan Heard, Invesco Fixed Income intern

Important information

Blog header image: Rob Crandall/Shutterstock.com

James Ong, CFA

Senior Macro Strategist

Derivative Portfolio Manager

James Ong is a Senior Macro Strategist and a Derivative Portfolio Manager for Invesco Fixed Income (IFI). Mr. Ong contributes economic and market analysis to the Macro Research platform. Mr. Ong leads IFI derivative strategy and oversees derivatives held in IFI portfolios.

Mr. Ong began his investment career in 2001. Prior to joining Invesco in 2014, he was a senior vice president, a senior portfolio manager and a senior trader at Hartford Investment Management Company.

Mr. Ong earned his BA degree in economics from Middlebury College. He is a CFA charterholder.

Noelle Corum, CFA

Portfolio Manager

Invesco Fixed Income

Noelle Corum joined Invesco Fixed Income in August of 2010 and is involved in derivatives, FX and rates trading, macro view implementation and asset allocation.

Ms. Corum began her investment professional career at Invesco following her undergraduate studies.

She earned a BS degree in business administration, with a concentration in financial analysis, from Saint Louis University, where she minored in mathematics and earned a certificate in service leadership.

 

Tags:
More in Fixed Income
Debt ceiling saga: Skipping ahead to the next chapter

Time to read: 3 min The Treasury market received a reprieve in September when the White House and Congress agreed on legislation coupling hurricane relief...

Close