Investors liked what they heard from Federal Reserve Chair Janet Yellen on Wednesday when she spoke to Congress about her dovish near-term outlook for U.S. interest rates. However, when asked directly whether or not she believed this week will be the last time she speaks to Congress, Yellen mostly dodged the question.
“My term expires in February, and so it may very well be,” she said.
[See: 9 Times Politics Directly Impacted the Stock Market.]
At one point, the idea that President Donald Trump could potentially keep Yellen around for a second term seemed like a long shot at best. During the 2016 campaign, Trump accused Yellen of being a “very political person.” He also said she should be “ashamed of herself” for the Fed’s policies during President Barack Obama’s administration, which Trump says artificially inflated the stock market.
“[Retirees] worked all their lives to save, and now what happens is they’re being forced into an inflated stock market. And at some point they’ll get wiped out,” Trump said.
However, in an April 2017 interview with the Wall Street Journal, Trump completely changed his tune. “You know, I like her…I do like the low interest rate policy,” Trump said then.
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Many experts still believe that Yellen, who is a Democrat, is likely still on her way out in 2018. Politico reported this week that Trump’s National Economic Council director and former Goldman Sachs Group (ticker: GS) president Gary Cohn is Trump’s top choice to succeed Yellen, according to a Republican close to the selection process.
But even if Trump decides to replace Yellen, it may not necessarily signal a major shift in monetary policy.
“The Trump administration is signaling that, as far as policy goes, and as far as interest rates go, they’re not too unhappy with the current policy,” St. Louis Federal Reserve chief James Bullard said in June. “This suggests that even if they reappoint her or appoint somebody else, you’d get some continuity in the process and you wouldn’t have an abrupt change.”
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With the Standard and Poor’s 500 index already up more than 9 percent in 2017, it’s understandable that Trump might think twice about disrupting the status quo. Predictability at the Fed is important for investors and knowing who will be in charge is a major piece of that puzzle.
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Who Will Lead the Fed in 2018? originally appeared on usnews.com
