President-elect Donald Trump is no fan of Federal Reserve chair Janet Yellen.
As recently as September, Trump said Yellen should be “ashamed of herself.” Now he will have the chance to replace not just her, but also at least three of her colleagues at the Fed, the most powerful financial institution in the world.
That’s because Yellen’s term expires in February 2018. Her close ally, Fed Vice Chair Stanley Fischer, also ends his term in the first half of 2018. In fact, even before he gets to those two, Trump will have the chance to nominate two other members to vacant Fed board seats, the nominations for which have been stalled in Congress.
That’s an unusually large number of appointees for Trump to nominate. Most presidents usually only get to nominate two Fed leaders because of the way terms are scheduled at the Fed.
Yellen is not expected to step down early, even though she has had to defend herself against Trump’s criticism that the Fed is political.
“We do not discuss politics at our meetings, and we do not take politics into account in our decisions,” Yellen also said in September.
All of Trump’s four future nominees will have permanent votes on the Fed’s powerful, 12-person committee.
“The next president will have an unusual degree of influence over the future composition of the” Fed’s committee, Zach Pandl, an economist at Goldman Sachs, wrote in a research note on Monday.
The Fed’s committee is considered one of the most influential financial institutions in the world because it takes decisions on America’s key interest rates. Those affect global markets, U.S. mortgage rates, credit card debt and bank savings accounts.
Although the Fed is independent, its top positions require presidential nominations, giving Trump immense influence over the direction of the central bank and monetary policy, which in turn impact the U.S. economy.
In fact, Trump could have an impact on the Fed’s interest rate decision at its next meeting in December, before he even takes over as president. But he can’t actually tell Yellen what to do.
However, if markets are roiled over the next few weeks due to the uncertainty surrounding Trump’s economic policies, the cautious Fed might nix its projected plans to raise rates in December.
“With this level of uncertainty and this dovish a Fed, I think it would be out of character for the Fed to raise in December,” says David Lafferty, chief market strategist at Natixis Global Asset Management.
For now, much of Wall Street — 71% — is still betting on a December rate hike.
“We continue to expect the Fed to move rate higher in December,” says Drew Matus, an economist at UBS. But “the odds [of a rate hike] are lower as uncertainty is higher.”
