President Trump has nominated Jerome H. Powell to be the next Chairman of the Board of Governors of the Federal Reserve System. In his role as Chairman of the Board of Governors (“the Board”), Mr. Powell would also chair the Federal Open Markets Committee (“FOMC”), the monetary policy decision making body composed of the other Federal Reserve Board governors and five of the 12 regional Federal Reserve Bank Presidents.
Administratively, both the Chairman and the Vice Chairman of the Board are named by the President from among the Board members and are confirmed by the Senate. They serve a term of four years. A Board member’s term on the Board is not affected by his or her status as Chairman or Vice Chairman.
Unlike his past two predecessors, Mr. Powell’s background is not concentrated in academia. Instead, his focus has been in business. However, similar to previous Chairs, Mr. Powell does have public policy experience, having served in the U.S. Department of the Treasury and as a Governor of the Federal Reserve Board, the position he currently holds.
His background suggests that, as Chairman of the Board and the FOMC, policy will be guided by his understanding of financial markets and the broader economy with the background of a practitioner. At the same time, his background in public policy suggests a familiarity with the general theories that typically inform economic policymaking. As a result, there may be some small changes to monetary policy, but these are not expected to greatly affect the current stance of monetary policy, with respect to both changes in the federal funds rate and balance sheet reduction.
However, additional changes to the FOMC are expected and these could alter the extent of consensus on the current direction of monetary policy. The first reason is because there are seven positions on the Board, but only 4 of the positions are filled currently, including the incoming Vice Chair for Supervision at the Board, Randal K. Quarles. The move of Mr. Powell to Chairman would open up another slot on the Board, presuming that Chair Yellen does not remain a member of the Board when her chairmanship ends.
Second, most of the bank presidents that also make up the FOMC rotate each year. Except for the President of the Federal Reserve Bank of New York, who holds a permanent position on the FOMC with the 7 Board governors and serves as the Vice Chair of the FOMC, the other four bank presidents currently serving as voting members of the FOMC will rotate off the committee and be replaced by four different bank presidents.
Despite these expected changes among FOMC members, the staff working at both the Board and across the regional Banks play a role advising the FOMC. Their analysis also helps to inform the decision making of this body.