President Trump nominated two more people Monday to serve on the board of the Federal Reserve, the institution that sets interest rates and plays a large role in steering the U.S. economy and banking system.
Trump nominated Richard Clarida, a Columbia University economics professor and longtime adviser to one of the world’s largest bond firms, to be vice chairman at the Fed serving under Chairman Jerome H. Powell. The Fed has indicated it intends to raise interest rates at least three times this year and another three times in 2019. If that path holds, interest rates would probably be over 2 percent by the end of this year and near 3 percent by the end of the following year.
The president also nominated Michelle Bowman, the current bank commissioner in Kansas, to be a Fed board member. She is Trump’s first female choice for the Fed out of the five people he has nominated so far. Clarida and Bowman’s positions require Senate hearings and confirmation before they can take the jobs, much like the process for Supreme Court justices.
Just hours before announcing the nominees, Trump tweeted that U.S. interest rates were rising, and he left it unclear whether he wanted that to continue. His nominees appear unlikely to push for raising rates any faster than the pace Powell has laid out since he took over as chairman in February.
Most presidents get to nominate a few people to the Fed, but Trump has an unusually large opportunity to shape America’s central bank for years to come because there were so many openings on the Fed’s board when he took office. The Fed board in Washington has seven seats, and Trump has the chance to fill six of the positions.
Trump has been clear that he wants the Fed to reduce the regulatory pressure on U.S. banks, but he has not been consistent on what he wants to happen with interest rates, which are already at the highest level in a decade.
Earlier in the day, Trump tweeted that China and Russia were taking advantage of rising U.S. interest rates by lowering the value of their own currencies. He called the situation “not acceptable,” although there is little evidence the two nations are actually devaluing their currency. In fact, Trump’s own Treasury Department did not name either country as a currency manipulator in a recent report.
During the presidential campaign, Trump accused the Fed of keeping interest rates low to make the economy look better under President Barack Obama. He also warned of a stock market bubble forming because the Fed was failing to act. Since becoming president, however, he has tended to favor lower interest rates, a break from the usual Republican stance of wanting to raise rates faster to curb inflation.
“I do like low interest rates. I mean, you know, I’m not making that a big secret. I think low interest rates are good,” he told the Wall Street Journal last year.
Clarida is seen as a safe and straightforward choice for Fed vice chairman who will provide deep knowledge in economic research to complement Powell, who spent most of his career in the investment world. Clarida has a PhD in economics from Harvard and served in the U.S. Treasury during President George W. Bush’s administration and on the Council of Economic Advisers for President Ronald Reagan, making many Republicans comfortable with him. But most of his time has been as a professor at universities and an adviser to PIMCO, a large fixed-income manager based in Southern California.
“Clarida is a skilled, thoughtful and data-driven macro economist that would serve Chair Powell and the board very well in a key post,” wrote economists Matthew Luzzetti and Peter Hooper of Deutsche Bank in a recent note to clients. “Data driven” has tended to be a code word for raising rates at a slower pace.
Bowman is a Republican who served in the George W. Bush administration and as a staffer for Sen. Robert J. Dole (R-Kan.). She was also an executive at a regional bank. Bowman is now the state bank commissioner of Kansas, overseeing financial institutions in the state. At the Fed, she would fill a position overseeing community and regional banks. Her monetary policy views are less-well-known and could be a focus in her confirmation hearing.
Trump’s five nominees so far include: Powell, Clarida, Bowman, Randal Quarles, who was confirmed as a board member and head of bank supervision, and economist Marvin Goodfriend, who had a rocky Senate hearing and awaits a confirmation vote that is likely to be contentious as many, if not all, Democrats and GOP Sen. Rand Paul of Kentucky plan to vote against him.
Trump’s only ability to influence the Fed is by the people he picks to serve at the central bank, because the Fed is an independent agency.