What Could a New-Look Fed Mean for Markets?

Speculation is building about a looming shake-up in the leadership of the US Federal Reserve. Transitions are nothing new—but the stakes this time are unusually high for the economy and markets.

The biggest question on investors minds: Who’ll lead the Fed? Janet Yellen’s four-year term as chair of the Board of Governors expires February 3, 2018, though her term as a Board governor runs until 2024. Yellen could stay on the Board even if President Trump doesn’t reappoint her, but it’s almost certain that she’d resign.

Based on past experience, we expect the president to announce a nominee for Fed chair in the next couple of months. Which names are being talked about right now?

The most commonly mentioned candidates include Yellen, as President Trump could simply choose to reappoint the Fed’s leader. Current Fed governor Jerome Powell, another candidate, would provide a measure of continuity. John Taylor’s name has been floated, too. A Stanford professor, Taylor is a well-respected thinker on monetary policy issues—and he’s also more likely to make dramatic changes.

Also on the list: Gary Cohn, director of the National Economic Council and former second-in-command at Goldman Sachs. Then there’s Kevin Warsh, a former Board member who has become a vocal critic of the Fed’s efforts to support growth. No one knows who the eventual choice will be—and a dark-horse candidate could certainly emerge.


Change isn’t happening only at the top. Three seats on the seven-member Board of Governors are currently open (Display). If the president doesn’t reappoint Yellen as chair but does fill the current and potential vacancies, it seems likely that the Board will have six members with less than a year’s experience by the end of 2018.