Fletcher in the News

Trump's Change at Fed's Helm is Also a Vote for Continuity: Prof. Klein Discusses with The Christian Science Monitor

At a time of turmoil in US politics and with uncertainty over the economy's future, President Trump tilted toward calm and continuity in one important arena this week by nominating Jerome Powell to head the Federal Reserve.

Mr. Powell is already a Fed governor and largely supportive of its current policy stance.

So the announcement is in effect a vote not to rock the boat at the institution charged with keeping the economy on a strong course, safeguarding it from financial crisis, and helping to set norms for central banks worldwide...

...“We’re very fortunate that we have a lot of very talented public servants at the Federal Reserve who really are nonpartisan and trying to do the best they can for the economy," says Michael Klein, a professor of international economics at Tufts’ University’s Fletcher School of Law and Diplomacy. "It seems [that Powell] understands that culture and wouldn't want to upset the apple cart.”

“There’s no rampant inflation. In fact the Fed has not even met its 2 percent ... target” for annual change in consumer prices, he adds.

Economists generally say a moderate level of inflation is healthier for an economy than very much or none...

...Perhaps most significant, his background is in law, investing, and government – so if confirmed Powell would break with the recent tradition of economists at the helm. That, some analysts say, could be a liability should the Fed find itself facing another crisis akin to the 2008 crash for banks and the economy.

“Having a PhD is not by itself any kind of indicator of competence,” says Mr. Klein, who is also founder of the EconoFact website. “But having that kind of background might be especially valuable” in a crisis.

“Yellen and [her predecessor Ben] Bernanke were very much responsible for bringing the economy out of what could have been a catastrophic event,” he adds.

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