‘You’re hired!’ What Trump’s Fed chair choice may mean for the global economy

“You’re hired!” Those words may soon resonate in Washington as US President Donald Trump, former host of The Apprentice, makes his pick to lead the Federal Reserve. But this is no game show. Appointing the next chair of the US central bank will be one of the most important decisions Trump makes, both for his administration and for markets.

US presidents understand the clout the chair of the Fed possesses. After losing the 1992 presidential campaign to Bill Clinton, President George H W Bush subsequently attributed his defeat to the failure of the Fed, led then by Alan Greenspan, to ease policy more aggressively ahead of the election.

“I think that if interest rates had been lowered more dramatically that I would have been re-elected,” said Bush in 1998, famously adding of Greenspan that “I re-appointed him and he disappointed me.”

In truth, no one should underestimate the influence of the chair of the Federal Reserve, a point emphasised by National Australia Bank (NAB) on Friday. “Fed governors don’t oppose the chair,” wrote Ray Attrill, NAB’s Head of FX Strategy. “The practical reality of the power that resides in the Fed chair is the rarity of any sitting Fed governor dissenting against the chair.”

Indeed, as NAB explained, the last time a Fed governor actually opposed the chair was back in 2002. And no New York Fed president has opposed the chair since Anthony Solomon dissented against Paul Volcker in 1984.

In essence, therefore, while monetary-policy setting at the Federal Open Market Committee (FOMC) is a collegiate affair, the opinion of the chair of the Federal Reserve has carried enormous weight in recent decades. That merely underscores the need to understand what the potential candidates stand for and what their appointment might mean for markets.