It’s official: according to most news sources, tomorrow Trump will announce that Fed governor Jerome “Jay” Powell is Janet Yellen’s replacement as the next bank-friendly Fed chair. Since Powell has served as Federal Reserve governor for the past five years, starting May 2012, he has had ample opportunities to express his views about the policies he will oversee if the Senate confirms him as the central bank’s next chairman. For those who want a detailed breakdown of each of the 48 speeches he has given since May 12, 2012, here’s a link to a WSJ speech analyzer breaking down all of his spoken public appearances.
For those pressed for time, below are samples of what he has said on important policy issues along the way. First, we look at the big picture items, courtesy of the WSJ’s David Harrison:
On Interest Rates
Mr. Powell, 64 years old, has backed Ms. Yellen’s policy of gradually raising interest rates if the economy improves as projected. In recent public remarks he has sounded an optimistic note, saying he expects inflation to move up to the Fed’s 2% target, economic growth to remain steady and the unemployment rate to fall further. “I would view it as appropriate to continue to gradually raise rates,” he said in June.
On Shrinking the Fed’s Portfolio
Mr. Powell in September voted in favor of beginning the yearslong process of winding down the central bank’s $4.5 trillion portfolio. Like Ms. Yellen, Mr. Powell has said the Fed could resort to new rounds of asset purchases in another crisis if the economy needs more stimulus. Putting new assets on the Fed’s balance sheet should be an option “only in extraordinary circumstances,” he said in February.
On Monetary Policy Rules
Mr. Powell has joined several of his Fed colleagues in warning against relying too heavily on mathematical rules such as the so-called Taylor Rule to guide monetary policy. That could put him at odds with congressional Republicans who have pushed the Fed to adopt such a formula in an attempt to make Fed policy-making more transparent and predictable. “Simple policy rules are widely thought to be both interesting and useful, but to represent only a small part of the analysis needed to assess the appropriate path for policy,” he said February. “I am unable to think of any critical, complex human activity that could be safely reduced to a simple summary equation.”
On Fannie Mae and Freddie Mac
Mr. Powell has called on Congress to overhaul the housing finance system, saying he’d like to see the country’s two large mortgage-finance firms, Fannie Mae and Freddie Mac, move out from under government conservatorship. More private capital in those firms would reduce the risk of a taxpayer-funded bailout in the event of a downturn, he said in a speech in July. Although the Fed isn’t responsible for housing finance, it supervises some of the country’s largest lenders who frequently sell their loan to the two agencies. “No single housing finance institution should be too big to fail,” he said.
Ffor a more nuanced take, also via the WSJ, here are explicit thematic summaries of his speeches on a variety of topics:
June 2013: ‘Volatility is unavoidable’
Mr. Powell spoke after a Fed policy meeting where officials signaled they would start cutting back a bond-buying program designed to boost the economy, which led to volatility in financial markets that became known as the “taper tantrum.” “Some volatility is unavoidable, and indeed is a necessary part of the process by which markets and the economy adjust to incoming information … I want to emphasize the importance of data over date … The path of [bond] purchases is in no way predetermined; we will monitor economic data and adjust our purchases as appropriate.”
March 2014: ‘As long as necessary’
Mr. Powell gave his views about the future of monetary policy at a Senate hearing: “Today, our economy continues to recover from the effects of the global financial crisis, unevenly and at a frustratingly slow pace. The task for monetary policy will be to provide continued support as long as necessary, and to return policy to a normal stance over time without sparking inflation or financial instability. This will require a careful balancing, as there are risks from removing monetary accommodation too soon as well as too late.”
June 2014: On ‘forward guidance’
Mr. Powell defended the Fed’s practice of using verbal guidance about the likely path of policy to affect long-term interest rates. “My view is that forward guidance has generally been effective in providing support for the economy at a time when the federal-funds rate has been pinned at its effective lower bound…To be sure, there have also been times when forward guidance and market expectations have diverged, with resulting spikes in volatility. Such situations may be difficult to avoid, given the use of new, unconventional policy tools, although we always try to communicate policy as clearly as possible.”
February 2015: Defending Fed emergency programs
With Republicans in Congress considering legislation to increase scrutiny of the Fed’s decision-making, Mr. Powell defended the Fed’s response to the financial crisis. He opposed congressional audits of monetary-policy decisions, requirements that the Fed hew more closely to a specific equation in setting policy and limits on its ability to lend to financial firms in a crisis. “The evidence as of today is very strong that the Fed’s actions generally succeeded and are a major reason why the U.S. economy is now outperforming those of other advanced nations … Given the scale of the Fed’s actions during the crisis, it has been not only appropriate but essential that these actions be transparent to the public and subject to close and careful scrutiny by the Congress. And that is exactly what happened. So it is jarring to hear it asserted that the Fed carries out its duties in secret and is unaccountable to the public and its elected representatives. The Federal Reserve is highly transparent and accountable to the public and to the Congress.”
February 2015: On activist regulation
In early 2015, the Fed and other regulators were cracking down on lending standards at big banks in the leveraged-loan market, where the borrowers are companies with high levels of debt. Mr. Powell supported the policy, but warily. “I believe there should be a high bar for ‘leaning against the credit cycle’ in the absence of credible threats to the core or the re-emergence of run-prone funding structures. In my view, the Fed and other prudential and market regulators should resist interfering with the role of markets in allocating capital to issuers and risk to investors unless the case for doing so is strong and the available tools can achieve the objective in a targeted manner and with a high degree of confidence.”
February 2016: ‘Let incoming data do the heavy lifting’
In December 2015, the Fed raised its benchmark interest rate for the first time in nearly a decade. Mr. Powell later explained the decision by the Federal Open Market Committee as driven by financial data. “In the statement released after its October 2015 meeting, the committee re-emphasized data dependence and focused on the importance of incoming data for the committee’s decision ‘at its next meeting,’ which led the market to increase its estimated probability of a December rate increase from 38% to 50%. The October and November nonfarm payroll reports came in strong and above expectations, raising that probability by the time of the December meeting to about 90%. In other words, the committee used modest time-based guidance to set the stage and then let incoming data do the heavy lifting.”
May 2016: On the risks of gradual rate rises
As officials talked about raising rates again, Mr. Powell advocated for moving gradually, while acknowledging the risks involved. “If incoming data continue to support [my] expectations, I would see it as appropriate to continue to gradually raise the federal-funds rate … There are potential concerns with such a gradual approach. It is possible that monetary policy could push resource utilization too high, and that inflation would move temporarily above target. In an era of anchored inflation expectations, undershooting the natural rate of unemployment should result in only a small and temporary increase in the inflation rate. But running the economy above its potential growth rate for an extended period could involve significant risks even if inflation does not move meaningfully above target. A long period of very low interest rates could lead to excessive risk-taking and, over time, to unsustainably high asset prices and credit growth.”
June 2016: Why low rates?
The following month, Mr. Powell explained why he believes the Fed is operating in a different climate than before the 2008 financial crisis. “I am often asked why rates remain so low now that we are near full employment. A big part of the answer is that, at least for the time being, the appropriate level of rates is simply lower than it was before the crisis. As a result, policy is not as stimulative as it might appear to be…I expect our economy to continue to make progress. Monetary policy will need to remain supportive of growth, as we work through the challenging global environment.”
November 2016: On Fed communications
Mr. Powell spoke last year about how members of the Fed’s policy committee should communicate with the public. “In my view, communications should do more to emphasize the uncertainty that surrounds all economic forecasts, should downplay short-term tactical questions such as the timing of the next rate increase, and should focus the public’s attention instead on the considerations that go into making policy across the range of plausible paths for the economy.”
January 2017: On limits of Fed power
He spoke in January about the limits of the Fed’s power to increase economic growth. “A period of low rates for a long time could present significant challenges for monetary policy. It could also put pressure on the business models of some financial institutions. Ultimately, the only way to get sustainably higher interest rates is to improve the broader environment for growth, by adopting policies designed to increase productivity and potential output over the long term—policies that are mainly outside the scope of our work at the Federal Reserve.”
February 2017: ‘Gradually tighten’
Mr. Powell praised the Fed’s patience and said it would be appropriate for the Fed to gradually tighten monetary policy over time. “I expect the economy to continue broadly along its current path, which implies further labor market tightening and inflation edging closer to 2%. On this path, unemployment would decline modestly below current estimates of the natural rate and remain there for some time. I see that as a desirable outcome and do not see data suggesting that we are behind the curve. In recent years, the economy has faced significant downside risks, particularly from weak global conditions. The [rate-setting Federal Open Market Committee] has been quite patient, and I believe that has served us well. But risks now seems to me to be more in balance. Going forward, I see it as appropriate to gradually tighten policy as long as the economy continues to behave roughly as expected. As always, the actual path could be faster or slower than expected and will depend on developments in the economy.”
February 2017: On flaws in rules-based policy
Mr. Powell commented on whether the Fed should follow more explicit rules when setting monetary policy. “Simple policy rules are widely thought to be both interesting and useful, but to represent only a small part of the analysis needed to assess the appropriate path for policy. I am unable to think of any critical, complex human activity that could be safely reduced to a simple summary equation. In particular, no major central bank uses policy rules in a prescriptive way, and it is hard to predict the consequences of requiring the [Federal Open Market Committee] to do so, as some have proposed. policy should be systematic, but not automatic.”
April 2017: Defending Wall Street regulation
Mr. Powell defended regulatory policies adopted after the financial crisis but left room for changing some of them. “Some aspects of the new regulation are proving unnecessarily burdensome and should be better tailored to meet our objectives. Some provisions may not need—may not be needed at all, given the broad scope of what we’ve put in place. I will support and I do support adjustments designed to enhance the efficiency and effectiveness of regulation without sacrificing safety and soundness or undermining macro-prudential goals.”
August 2017: The Mystery of Inflation
“Inflation is a little bit below target, and it’s kind of a mystery,” he said in August in a CNBC appearance. “You would have expected, given that we’re getting tighter labor markets, that we’d have a little higher inflation. I think that what that gives us is the ability to be patient.”