Funds industry backs new Fed chairman

US_federal_reserve_buildingFund managers have broadly welcomed President Donald Trump’s nomination of Jerome Powell as the new chairman of the US Federal Reserve.

Powell, a former lawyer, private equity executive and a member of the Fed’s board since 2012, is widely seen as a safe pair of hands and as the continuity candidate.

He will be the first non-economist to hold the post in more than a generation.

“Jerome Powell’s appointment as Fed chair represents policy continuity in the near-term, suggesting a slightly easier monetary stance than some other contenders for the role,” said Anna Stupnytska, an economist at the Bermuda-based fund house Fidelity International.

Stupnytska added that Powell has tended to stick to the Fed’s consensual “party line” and this suggested that the US central bank would continue its policy of gradually hiking interest rates, with the possibility of a pause in 2018 if inflation remains unexepectedly low.

“Perhaps the biggest takeaway, or market focus, is that Powell is in favour of financial deregulation,” Stupnytska said. “He can have more influence in this sphere, and his appointment is a step towards easier conditions for financial institutions.”

Natixis Global Asset Management chief market strategist David Lafferty said that Powell’s nomination ticked “all the right policy boxes in a way that the other potential candidates couldn’t”.

“For all of Trump’s anti-Fed rhetoric on the campaign trail, he recognizes the value of the Fed’s open market committee’s current dovish normalisation – a reduction in monetary stimulus slow enough to keep the US economy humming along,” he said.

“In a sense, Trump gets to replace Yellen, the Obama-nominated Democrat, with a more pro-business, Republican version of Yellen.”

Powell’s nomination is subject to confirmation by the US’s Republican-dominated Senate.

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