We’re just about done musing about the possible firing of Federal Reserve Chair Jay Powell, whose term is set to expire in May.
Now, the hottest central banking parlor game is who President Donald Trump will choose as Powell’s replacement. The decision, per Trump, is coming “very soon.”
The leading contender appears to be Kevin Warsh, a former Fed governor. Treasury Secretary Scott Bessent has also been floated. But we’re not here to belabor names.
Instead, we’ve spent this month asking Senate Republicans whether the next chair, whomever that is, should maintain Powell’s approach that the Fed act completely independently of the president? Or, would it be OK for Trump to nominate someone who, in his words, would give him more of a “say” in monetary policy?
Senate Banking Committee Republicans took a cautious approach to our question. They did say they want someone who will act independently. But they added they’re fine with a chair talking to Trump — noting Powell recently visited the White House at Trump’s request.
“The Federal Reserve is and should continue to be independent, and there’s nothing wrong with the Federal Reserve chair talking to a president,” Sen. John Kennedy (R-La.) said. “Happened just recently.”
Sen. Mike Rounds (R-S.D.) took a similar position.
“I don’t think there’s anything wrong with the Fed chair visiting with the White House or with members of Congress,” he said. “In fact, we encourage it. But we expect them to stand the ground and to do what is statutorily accepted to them.”
Pressuring the chair: Trump’s relationship to Powell and the Fed has always been a bit rocky. Trump likes low rates. COVID-era inflation made that untenable, and trade wars haven’t helped in the meantime.
Trump has lobbed many angry posts in Powell’s general direction since January. Trump’s belligerent approach toward Powell has raised questions about whether he would nominate someone who would maintain independence as a bright red line not to be crossed.
Supporters of a completely independent Fed say it gives markets confidence that decisions are being made solely based on what the economics dictate.
“The only places where it’s not independent is in countries whose Powerball jackpot is 287 chickens and a goat,” Kennedy said.
But, look: We’re talking about the Senate. There’s never been any amount of nose-holding that will keep politics out of the nomination process. Some Senate Republicans are willing to embrace that dynamic.
Here’s Sen. Kevin Cramer (R-N.D.):
But Cramer added the Senate doesn’t have to confirm a pick it doesn’t think is up to the job.
“Donald Trump will get to pick the next Fed chairman. That’s going to determine what kind of a Fed chairman we have in a Republican Senate,” he said. “Maybe we’ll confirm that person. Maybe.”
