On Powell for Fed Chair
Powell for Fed chair is a timid low-risk choice that takes a potential shock to markets off the table. But it is a missed opportunity to reform a key global financial institution with a swamp-drainer like Warsh. Conservative darling Taylor may yet be vice chair, his highest use. Powell is bought into the elite mantra of “secular stagnation,” and believes that a return to pre-Great Recession growth rates is impossible. If he is proven wrong about that, he is vulnerable to influence by Fed staff to tighten policy in response to false fears of a Phillips Curve trade-off between employment and inflation. Powell has no apparent commitment to deregulation, but that is Quarles’ remit anyway.