President Donald Trump’s widely-reported selection of Marvin Goodfriend for a seat on the Federal Reserve’s board of governors belies a trendy view that the president is a secret fan of Janet Yellen’s dovish interest-rate policy.
“Many market participants have been barking up the wrong tree, arguing that Trump is an easy money guy because he borrowed a lot when he was a real-estate tycoon,” said Steve Stanley, chief economist from Amherst Pierpont, in a note to clients.
“Look for the Fed Chair slot to be filled by someone who is closer to Goodfriend…than to Yellen,” Stanley wrote.
After criticizing Yellen during the campaign, Trump had kinder words for the Fed chief in an interview with the Wall Street Journal in April. This led to speculation the president might nominate Yellen for a second term. Her current term ends early next year.
Read: Why did Trump flip flop on Yellen? She may be the dove he needs, analysts say
Instead, Trump’s pick of Goodfriend is almost boringly Republican, analysts said.
Goodfriend “could easily have been chosen by the other Republicans who ran for president,” said Ian Katz, an analyst with Capital Alpha Partners.
Peter Ireland, an economics professor at Boston College, said it was easy to imagine Goodfriend would have been appointed “if we were back” in the administration of President George W. Bush.
“Trump will probably hate hearing that, but it’s true,” Ireland said.
Goodfriend is on the hawkish side of the street, and “on its face is not consistent with the notion that Trump will seek to foster low rates and a weaker dollar by nominating doves,” said Krishna Guha, a former Fed official and now vice chairman of Evercore ISI.
Supporters of easy Fed monetary policy, like David Blanchflower, economics professor at Dartmouth College, were not thrilled by Goodfriend’s nomination.
Marvin goodfriend at the fed should help to tighten monetary policy and push us into recession and trump out of office
— Danny Blanchflower (@D_Blanchflower) June 5, 2017
Goodfriend worked at the Richmond Fed for a dozen years until 2005 and attended Fed interest-rate policy meetings as the top economist at the regional bank.
Goodfriend has two positions that appeal to mainstream Republicans. First, he has been a critic of the Fed’s quantitative easing, or bond-buying, program in the wake of the financial crisis, especially the purchase of mortgage-related assets. Many Republicans view the bond-buying program as big government run-amok.
And Goodfriend has suggested the Fed should follow a more rules-based monetary policy as House Republicans have advocated.
Goodfriend is also a member of the Shadow Open Market Committee, a self-appointed group of free-market conservative economists that closely monitors the central bank.
The group, now a project of the free-market Manhattan Institute think tank, generally wants the Fed “to stick to its knitting, making monetary policy as minimally as possible and get out of the way,” said Robert Brusca, chief economist at FAO Economics.
Adding to the sense of a Bush legacy, Trump is expected to nominate former Bush Treasury undersecretary Randy Quarles as the Fed’s top bank regulator.
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