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Is This Fed Chair Decision One of the Most Pivotal Ones Ever?

October 16, 2017
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As the decision of who will lead the Fed looms large, the President is being left with a tough decision: Does he pick someone who will continue Janet Yellen’s policies or does he choose someone with a whole new approach?

As Reuters puts it:

The leaders of the world’s top central banks who risked trillions of dollars and their reputations to rescue the global economy are now set to walk off stage at a time when the lingering effects of the crisis, evolving technology and a combustible political landscape will challenge their successors.

It is difficult to think of a recent time where so much was in flux. The economy is going through a massive shift under the current administration, leaving whomever is chosen some serious growing pains to take care of. The experience that Yelen has in her current role is therefore very important. She was involved with the government buyback strategy that helped lift the country out of a recession. As a result, Reuters also acknowledges the real possibility that Yellen could be reappointed.

Yet not everyone shares the view that a reappointment or even a similar agenda would be the right idea. In an interview with CNBC, financial advisor Komal Sri-Kumar advocated a different approach. He says:

the U.S. economy is being artificially “propelled by the excessive amount of liquidity” due to the easy money policies of the current Fed.

Sri-Kumar’s argument is a strong one; interest rates are still incredibly low, as are inflation rates. He believes that a far more hawkish pick such as Kevin Warsh would be better for the economy.

Click here to read our article about how the Fed has come up short on rate hikes in the past.

Either way the President chooses to go will have a dramatic effect on a Fed and economy that is in flux. Between renegotiating trade deals and overhauling the tax code, President Trump is in the midst of making the job of chair a tall order for anyone, no matter how much experience they have. The future growth of the dollar will also take the shape of the strategy of whomever sits at the top of the Fed. It will be interesting to see what happens in early February when it comes time to make a decision.

To read Reuters’ article on the meeting of the world’s largest central bankers, click here.

To read CNBC’s article on Sri-Kumar’s view on the Fed, click here.

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