President Trump has promised to announce his choice for Fed chair in two or three weeks, and, this time, he might mean it. If it’s Yellen, of course, we can go back to our desks. Some on the short list, including Gary Cohn, are blank slates with not much of a track record. But two Republican non- economists, Kevin Warsh and Jerome Powell, are now seen as front runners, so it’s worth thinking about their implications for 2018 Fed policy.
Under Powell, odds are that the path ahead wouldn’t materially differ from a Yellen- led Fed. He’s been in the consensus pack in both actual rate votes and speeches. If fiscal stimulus boosted GDP growth, barring firm evidence that the changes were lifting productivity or labour force participation (and therefore potential non-inflationary growth), a Powell (or Yellen) Fed would respond with offsetting monetary tightening.