They’ve got the nod, but will they get the nomination? President Trump said on Tuesday that he intends to nominate Judy Shelton and Christopher Waller to fill the two open seats on the Federal Reserve Board of Governors.
Shelton may not have the personal baggage that sunk the floating of Stephen Moore and Herman Cain’s nominations. However, she is clearly a Trump loyalist, is on the margins of economic thinking with her support of the gold standard, and inconsistent in her opinions regarding monetary policy. Shelton also lacks the sort of strong background in research and academia, government service, and/or market experience that is the hallmark of successful nominees. She might be able to withstand the vetting process – having already done so for her position on the European Bank for Reconstruction and Development. But she is no more likely to be able to survive rigorous questioning by the Senate Banking Committee than that which stymied nomination of Marvin Goodfriend. And she is vulnerable on the issue of supporting Fed independence or setting monetary policy based on hard data. I would not be surprised if enough Republicans quietly indicated they could not support her, and her name is withdrawn to prevent an embarrassing public display. If she does get officially nominated and proceeds with the confirmation process, I look for an ugly hearing.
Waller, on the other hand, is an Executive Vice President at the St. Louis Fed and has a solid record of published papers. He is a through-and-through economist with significant experience at one of the District Banks. He is not associated with any particular political leanings. He even published an article in 2011 supporting the independence of the Federal Reserve (“Independence + Accountability: Why the Fed Is a Well-Designed Central Bank”). He may be a supporter of St. Louis Fed President James Bullard’s framework for monetary policy and Bullard’s recent calls for lower interest rates. Given that Trump gave consideration to naming Bullard to the Board, it isn’t entirely surprising he would look at Bullard’s organization for a possible alternate. However, I would anticipate that Waller would be no more likely to act as Trump wants regarding monetary policy than would Chair Jerome Powell. Waller is a reasonable candidate for the Board and one who would have a good chance of getting through the nomination process. Adding his voice just wouldn’t be enough to change the consensus on the FOMC and get Trump the rate cuts he craves. Waller would probably align himself with the view that the FOMC might decide to lower short-term rates, but it would be based on the data and developments, not political pressure.
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