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The Next Fed Chair

Summary:
Good central bankers make decisions based on what they believe is best for the economy, relying on evolving data, not on evolving political imperatives. Only two of the Trump administration's five apparent candidates to chair the US Federal Reserve fit the bill. CAMBRIDGE – US President Donald Trump’s administration is expected, by November 2, to announce its choice, subject to Senate approval, to succeed Janet Yellen as Chair of the Federal Reserve Board in February 2018. The White House has indicated that it is weighing five potential candidates. Not all of them would be a good choice. White House From the HBO mini-series Burning Bush Kevin Frayer/Getty Images Previous Next

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Good central bankers make decisions based on what they believe is best for the economy, relying on evolving data, not on evolving political imperatives. Only two of the Trump administration's five apparent candidates to chair the US Federal Reserve fit the bill.

CAMBRIDGE – US President Donald Trump’s administration is expected, by November 2, to announce its choice, subject to Senate approval, to succeed Janet Yellen as Chair of the Federal Reserve Board in February 2018. The White House has indicated that it is weighing five potential candidates. Not all of them would be a good choice.

The first candidate is Yellen herself. Though Yellen is a Democrat originally appointed by President Barack Obama, there is strong precedent for Trump to re-appoint her. Her three predecessors – Ben Bernanke, Alan Greenspan, and Paul Volcker – were each re-appointed to second terms by a president of the opposite party from the one who first appointed them, reflecting the value of continuity and predictability in central banking.

Yellen, whom I have known since we worked together in 1977, has performed very well in her nearly four years as Fed Chair. Though she hasn’t confronted a crisis, she did help to sustain the US economy’s steady recovery from the 2007-09 recession. Yellen, like Bernanke before her, used the Fed’s tools with a combination of clear communication and policy flexibility, shifting course as data revealed subtle changes in economic conditions.

The results speak for themselves. When Yellen was appointed to the Fed Board as Vice Chair in 2010, the US unemployment rate was at 9.9%. By the time she was promoted to Chair in 2014, it had fallen to...

Jeffrey Frankel
Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers. He directs the Program in International Finance and Macroeconomics at the US National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, the official US arbiter of recession and recovery.

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