Kevin Warsh clear favourite to take over as Fed Chair, Oxford Economics says

Former Federal Reserve Board governor and Morgan Stanley banker Kevin Warsh has a 40% chance of being appointed as the new chair of the Fed, according to Oxford Economics.

Donald Trump has said he will appoint a new chairperson in the coming weeks, with Warsh having already been interviewed for the position.

Current Fed Governor Jerome Powell is given a 25% chance of picking up the nomination, while the economists at Oxford have suggested current chair Janet Yellen still has a chance of retaining her position with a 15% possibility.

National economic adviser Gary Cohn, who had been the odds-on favourite to be appointed by the President until he criticised Trump's response to the Charlottesville violence, has fallen down the pecking order and now stands just a 10% chance.

Whilst a continuation of Yellen’s term in charge would be the preferred options for markets, Oxford said the most likely scenario is that Trump wants to put his own “stamp” on monetary policy.

REGULATION ROLL-BACK

Warsh has said he is in favour of repealing much of the financial regulation which arrived in the aftermath of the global financial crisis in 2008, and would also seek to drive interest rates higher at a quicker pace than Yellen.

“His stance on regulation roll-back endears him to President Trump and Republican Senators,” the research paper said. “That he would push to raise rates faster than Yellen is a minor negative for Trump, who likely prefers low rates.”

Yellen’s speech at Jackson Hole in August appeared to have ruled her out, as she defended her policies of acquiring assets as necessary and effective.

However, Trump could be persuaded to give her another term, after saying that he likes her demeanour and the fact that she has maintained low interest rates.

“Her support among financial market movers and shakers may outweigh that as many would prefer her steady leadership and reliable presence.”