Trump's Fed leaders may include both John Taylor and Jerome Powell

By The Fed FOXBusiness

Fed Chair Janet Yellen meets with Gary Cohn at White House

RealClearMarkets editor John Tammy weighs in on Fed Chair Janet Yellen's meeting with President Trump's chief economic adviser Gary Cohn at the White House.

President Donald Trump may give the Federal Reserve a double dose of top talent by nominating two top contenders, Federal Reserve Governor Jerome Powell and Stanford University economist John Taylor, as candidates for either Fed chairman and vice chairman, but it is still unclear which role either would get, FOX Business has learned.  

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As the decision comes down to the wire, President Trump may decide to reward two factions within the White House that are involved with the search process, one led by Treasury Secretary Steven Mnuchin, who prefers Powell, and the other by Vice President Mike Pence, who favors Taylor, according to those familiar with the matter.

A White House spokeswoman would not confirm or deny the possibility that Taylor and Powell could be asked to lead the Fed in separate positions, telling FOX Business there is “no additional guidance on names or timing at this time.”  White House officials have previously said Trump’s decision will likely come before his trip to Asia, which he’s set to leave for on Nov. 3.

When asked by Maria Bartiromo on Friday in an exclusive FOX Business interview if his administration is considering bringing Taylor and Powell into the Fed together, Trump said, “It is in my thinking, and I have a couple of others things in my thinking but I like talent and they’re both very talented people. It’s a hard decision.” The full interview is set to air on FOX News Channel on Sunday Morning Futures.

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The decision to possibly appoint two of the administration’s preferred candidates comes as Stanley Fischer, the former vice chairman of the Fed, steps down, leaving an opening for another Trump appointee to the central bank. Fischer’s last day at the Fed was on Oct. 13.

Trump has not made a final decision on a candidate for the Fed’s top job, according to White House officials.  The other candidates still on the contender list are current Fed Chair Janet Yellen, former Fed governor Kevin Warsh and National Economic Council director Gary Cohn, officials say.

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A spokeswoman for Pence did not return calls for comment, and a Treasury spokesman declined to comment when reached by phone.

As FOX Business has previously reported, Mnuchin, one of the White House officials involved with interviewing Fed candidates, prefers Powell to replace Yellen as chair, sources say. Yellen’s term ends in February, and she met with Trump on Thursday at the White House to discuss her future. According to those familiar with the conversation, the meeting lasted about 30 minutes.

On the other hand, Pence and conservative congressional lawmakers favor Taylor, who has been lauded globally for his economic modeling. He developed the “Taylor rule,” which gives a recommendation about how nominal interest rates should be determined. 

His work is said to be used by central bankers in policy making reviews. In recent years, he has also been cited as a potential winner of the Nobel Prize in economics, according to Reuters.

Taylor also worked with Pence as an outside advisor when he was a U.S. representative and worked with him on a bill that required it to focus only on achieving low inflation and to cut back on the so-called dual mandate, which centers on stabilizing prices and maximizing U.S. employment.

Taylor is an economics professor at Stanford University and served as the undersecretary for the Treasury during President George W. Bush’s first term.

Powell is a current member of the Federal Reserve Board of Governors and was a partner at the Carlyle Group, a private equity firm, from 1997 to 2005. He also served as undersecretary for the United States Treasury under President George H.W. Bush from 1990 to 1993.

Lobbyists and think tanks are already preparing their clients for the possibility of Powell and Taylor joining the administration as a team. Beacon Policy Advisors, a policy research firm out of Washington D.C., told their clients in a note on Thursday that they believe Trump will choose both candidates to be part of the Fed in order to appease the different groups within the White House.

“Optics matter more than policy for the president. Our base case is that Trump chooses Powell as chair and Taylor as vice chair, but vice-versa is also a possible outcome. We believe that both Taylor and Powell will be willing to be the other's vice chair. Powell already indicated he would be okay with vice chair and Taylor would likely prefer it to no role at all as he could play an outsized role as a top academic on the Fed board,” the note read.

Predict It, which allows participants to bet on who will become the next Fed chair, shows Taylor’s odds of leading the Fed jumped from him being in fourth place on Thursday to second place, just behind Powell on Friday.

The decision on whether or not Yellen will stay on as chair could come as early as Friday, according to those who are part of the discussions, and, if not, Trump is leaning toward deciding next week.

Yellen is set to deliver a speech Friday evening at the National Economists Club Herbert Stein Memorial Lecture and Annual Dinner, in Washington D.C. titled ‘Monetary Policy Since the Financial Crisis.’

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