MacroscopeWhy the Fed is likely to raise interest rates faster than you think

The US central bank may up the pace of interest rate rises next year. And that’s despite the fact President Trump just unveiled a pick for the next chair of the Federal Reserve who is already tied to its existing gradual approach, and despite Friday’s sub-forecast US non-farm payrolls number.

Jerome Powell, Trump’s preferred successor to incumbent chair Janet Yellen, certainly appears a strong supporter of the Fed’s current slow-but-steady rate increase policy. Powell, as US bank BNYMellon has pointed out, “has always voted with the majority, never once objecting in the 44 votes that he has cast.”

Perhaps it’s no wonder then that the UK’s Barclays Bank characterised the proposed change at the Fed as “Meet the new boss, mostly the same as the old boss.”

There’s also the issue that with Powell’s elevation there are still unfilled posts on the Fed’s board of governors, including that of vice-chair. There’s no guarantee that policy doves will be promoted.

Indeed, Stephen Chiu at China Construction Bank (Asia) in Hong Kong feels that “all in all, given that the upcoming voters are more likely to be hawkish than not, the 2018 FOMC set-up could be one of the most hawkish set-ups in recent years.” He was referring to the Federal Open Market Committee, that decides monetary policy.

Personalities aside, the Fed will continue to frame policy based on emerging US economic data.