Romney “intends to use his new position to try to shield the Fed from overt politicization as part of what we expect will be a broader effort to curb the excesses of the Trump administration and its undermining of independent institutions within government,” Krishna Guha, head of the global policy and central bank strategy group at Evercore ISI, said in a research note. “Romney’s standard – that he wants to see Fed nominees who are economists first and partisans second – would appear to rule out Moore too.”
Moore, though, may have an easier time of it simply because the Republican-controlled Senate may not want to reject both of its president’s nominees.
Markets will be watching the developments closely. The Fed is always a focal point for Wall Street but has been even more so as Trump has stepped up his criticism even while Chairman Jerome Powell has indicated no rate hikes are planned at least through the rest of 2019.
Trump “has demonstrated repeatedly disregard for institutional independence within government,” Guha said, and if that persists it has the potential to rattle markets.
“Against this backdrop, the readiness and ability of Romney and other pro-business Republicans to be effective gatekeepers now on the current batch of nominees will materially influence how markets price the risk of a more serious assault on Fed independence – one of a cocktail of political risks that will take on substantial importance in the run-up to the 2020 election,” Guha wrote.
For his part, Trump has said he believes in Fed independence, but also in expressing his desires.
“The president believes, and I concur, that the Fed’s target rate should be lower,” Larry Kudlow, the chairman of the National Economic Council and a key advisor to Trump, said Tuesday at the National Press Club. “As you may now, the president is not bashful about expressing his opinions. … He actually knows quite a bit about this stuff.”