(Bloomberg) -- Former President Donald Trump wants the White House to have a say on interest rates. The Federal Reserve governor seen as a possible candidate to lead the central bank in a second Trump term is vehemently opposed to the idea.
Aside from Chair Jerome Powell, Christopher Waller is one of two other Trump appointees on the Fed’s Board of Governors in Washington. Before he joined the Board in 2020, the 65-year-old economist devoted part of his career to quantifying the benefits of central bank independence — and he’s continued as one of its biggest advocates in his latest role.
Waller, when asked about Trump’s views after a speech at the University of Notre Dame earlier this month, pointed to strong support in Congress and financial markets for the Fed’s autonomy when it comes to setting interest rates.
“If the president wants to complain about it, he is free to do so just like everybody else,” Waller said. “That doesn’t mean I have to listen or adjust policy to that, but he is entitled to every damn opinion he wants.”
Trump would therefore face a difficult choice if he’s reelected in November. Though many of the former president’s advisers like the Fed governor, Waller is unlikely to welcome input on monetary policy from the White House. That could dim his prospects if Trump wants to get serious about leaning on the central bank. But he may have one clear advantage over other potential Trump nominees: He’s confirmable in the Senate.
“He has been very reasonable, and it is hard to perceive that he is political,” Michael Feroli, the chief US economist at JPMorgan Chase & Co., said of Waller. Among other points in his favor: He would “defend the institution more” than some other likely candidates, Feroli said.
Waller has during his four years as a Fed governor become one of the most influential policymakers on the central bank’s rate-setting Federal Open Market Committee. His speeches are read closely for their calls on the economy and guidance on interest rates.
Speaking after the release of a monthly jobs report on Sept. 6, he moved markets by offering a road map for rate cuts over the next few months: An initial reduction at the Fed’s Sept. 17-18 policy meeting followed by larger adjustments if “subsequent” labor market data continue to soften.
“I was a big advocate of front-loading rate hikes when inflation accelerated in 2022, and I will be an advocate of front-loading rate cuts if that is appropriate,” Waller said in the speech at Notre Dame, where he chaired the economics department in the 2000s before taking a top job at the St. Louis Fed.
That declarative style — which presents a stark contrast with the frequent hedging of Washington’s many “two-handed economists” — is appreciated on Wall Street for its clarity.
“He is willing to answer the question,” said Michael Gapen, the incoming chief US economist at Morgan Stanley who studied under Waller as a graduate student. “He can speak to both financial markets and economists in ways that few people can.”
Part of Waller’s appeal, especially to Republicans, is that he is not a Washington insider, and it shows even beyond his speeches on monetary policy. Of the seven current Fed governors, he’s the only one who hasn’t had a previous government job or political appointment.
Neither of Waller’s parents attended college. All of his degrees, including his Ph.D. in economics, are from state schools. In the summers as an undergraduate, he loaded trucks at a warehouse with the Teamsters to help pay the bills, according to a friend who has known him for decades.
Waller’s pastimes don’t include playing golf or tennis with Washington elites. He lifts weights with his wife, a CrossFit trainer, and can deadlift just over 300 pounds, the friend said.
Powell, whose term as Fed chair isn’t up for another two years, is a native Washingtonian who understands the mechanisms of influence. He contacted Steven Mnuchin shortly after Trump announced Mnuchin would be his pick for Treasury secretary in 2016 — about two years before then-Fed Chair Janet Yellen’s term was up — and Mnuchin ended up being key in helping Powell secure Trump’s approval.
Waller’s calendars for this year show appointments with a wide array of constituents. He meets with bankers and regulators, other central bankers, economists and Fed presidents, since he is the lead governor overseeing the 12 reserve banks. Importantly, he also has regular contact with lawmakers. He’s met with Representative Blaine Luetkemeyer, a Missouri Republican, and Democrats such as Senate Banking Committee Chair Sherrod Brown of Ohio, Maryland Senator Chris Van Hollen and New York Senator Kirsten Gillibrand – and this could benefit him if there were a confirmation hearing down the road.
In 2020, Waller’s appointment to the Fed Board was confirmed in a narrow 48-47 vote along party lines in the Senate. Sarah Binder, a political scientist who works at the Brookings Institution in Washington, said the vote reflected general “antipathy” toward Trump nominees on the part of Democrats.
It also took place in December of that year, and “it made little sense politically for Democrats to pony up any votes to confirm a lame-duck Trump nominee” regardless of anyone’s personal views toward Waller, Binder said.
For those advising Trump on possible Fed chair selections, the top preferences are Kevin Hassett — who worked in Trump’s White House — and Kevin Warsh, a former Fed governor whom Trump considered for chair in 2018.
Whether ties to Trump would count against such potential candidates in the Senate is an open question. During Trump’s first term, Republican senators crossed party lines to block some of his Fed appointments, resisting the former president’s attempts to wield more control over monetary policy.
In addition to appointments, those attempts also included direct attacks on Powell via social media and private arguments with him over the level of interest rates. In August 2019, Trump asked in a tweet, “Who is our bigger enemy, Jay Powell or Chairman Xi?” referring to the Chinese president. Then in November, after meeting with Powell, Trump tweeted, “I protested fact that our Fed Rate is set too high relative to the interest rates of other competitor countries. In fact our rates should be lower than all others.”
Uphill Battle
But if Waller — whom many of those advising Trump also like — could find favor with the White House despite differences over who should decide interest rates, his nomination could still face an uphill battle with Senate Democrats like Elizabeth Warren, who have attacked Powell over bank regulation.
As a Fed governor, Waller has been open to new rules for banks. He voted in favor of an update to the Community Reinvestment Act, saying it provided “more clarity to banks on the criteria needed to comply,” while another Trump appointee — Fed Governor Michelle Bowman — opposed it.
But he’s also leaned against proposals that attempted to dictate standards to the industry when the risks, in his view, weren’t clearly defined. Take climate change. Waller’s position is that it doesn’t pose a serious risk to the safety and soundness of the banking system.
In the months ahead, one of Waller’s biggest predictions will be put to the test. Throughout the Fed’s tightening campaign over the last two years, he has championed the notion that maybe this time the central bank could bring inflation under control without causing millions of job losses. given the unique circumstances of the pandemic.
Waller and a co-author, Andrew Figura, argued that if the economy cooled, companies were more likely to take down extra listings rather than fire workers, haunted by the difficulties they faced in filling positions as the economy reopened. Their idea was attacked by prominent economists including Olivier Blanchard and Lawrence Summers, who said it “flies in the face of theoretical and empirical evidence.”
So far, the reality has tracked more closely with Waller and Figura’s vision — job openings have come down quickly as inflation has moderated. But the monthly jobs report published on Sept. 6 showed hiring moderated over the last three months to the slowest pace since the onset of the pandemic in 2020.
If the slowdown proves temporary, it will help solidify Waller’s reputation as a forecaster. For now, he’s sticking to his call, though with perhaps a bit more caution in his tone: “While I don’t see the recent data pointing to a recession, I do see some downside risk to employment that I will be watching closely,” he told the audience at Notre Dame.
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