The White House’s final potential pick, Gary Cohn, is currently the director of Trump’s National Economic Council. But Cohn, who has no background whatsoever in monetary economics and whose views are unknown, may already be out of the running.
The complaint of most Republican leaders since Obama took office in 2009 is that monetary policy has been too loose. (Trump said the same when he was campaigning for the presidency, though, once in office, he suddenly proclaimed himself a “low rates guy.”) House Republicans wanted the Fed to adopt Taylor-style rules then; now, they want Trump to appoint Taylor himself.
But, historically, Republicans have pushed easy monetary policy when they have had the presidency. If, as is likely, financial markets and the economy run into headwinds in the medium term – perhaps in the run-up to the next presidential election – Trump will almost certainly blame his troubles on the Fed. The complaint, however, will not be that monetary policy is too easy, but that it is too tight.
Good central bankers wouldn’t heed such politicized criticism either way. They would make decisions based on what they believe is best for the economy, relying on evolving data, not on evolving political imperatives. The sitting governors have demonstrated the ability to do that.
Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers.