Yellen likely to be replaced as Fed chair by Cohn, economists think

Janet Yellen is not expected to get a second term as Federal Reserve chair, with Donald Trump's chief economic adviser Gary Cohn seen as the favourite to take over as head of the US central bank.

A survey of 176 US economists for the National Association for Business Economics found only 17% think Yellen would be get a nomination for a second four-year term when her first ends in February.

Following media reports over the summer that President Trump is increasingly unlikely to nominate Yellen for a second term, two thirds of economists said Yellen would not get a second nomination, with the remaining 16% unsure.

Looking at likely successors, 49% felt former Goldman Sachs president and chief operating officer Cohn would get the gig, with 9% plumping for former Fed board member Kevin Warsh and 6% for Stanford economist John Taylor.

On US political betting service PredictIt Yellen still remained the favourite, though money backing Cohn has made a big jump into a close second place on Monday, with Warsh in a distant third.

Economists also expressed worry about the prospects for President Trump's policy agenda, and the potential damage to the economy from his trade and immigration policies.

The NABE survey put only a 10% chance of Trump passing tax reform legislation this year and a 15% probability it will be voted through next year.

More than the respondents said tax reform could add less than one percentage point to real GDP growth over the next 10 years, while a third put the impact on growth at between one and two percentage points.

The survey was taken up until 2 August, with Trump's deteriorating relations with the business community coming to a head last week and sending stocks tumbling.

In reaction and protest over the President's weak response over the actions of marching white supremacists in Charlottesville, where one counter-protestor was killed, the departures of many prominent captains of industry from Trump's three White House business councils led to all of them being disbanded.

"I do think that is some of the concern, that everything that has transpired recently, especially over last week, may impair the administration's ability to get its legislative agenda passed," said Frank Nothaft, a policy analyst with the NABE told news agency AFP.

Confidence in the Trump administration had wavered badly on reports that Cohn might also leave his post following the president’s widely lambasted response to the unrest in Charlottesville.

But the mood was given a late fillip on Friday thanks to news that controversial chief strategist Steve Bannon had been fired, with Cohn's one of the names put forward as a replacement.

On Monday the mood had clouded again, with optimism over Bannon’s removal proving short-lived, said analyst Joshua Mahony at IG in London.

"A proponent of the protectionist ‘America first’ policies heralded by Donald Trump, Bannon’s confrontational stance led to growing fears over the likelihood of an extension to the US debt ceiling without funding for the Mexican wall," he said.

"Even if we see a more traditional economic thinker such as Gary Cohn take Bannon’s place, there is a feeling that Trump has lost too much support over recent weeks to truly pass any meaningful legislation."

Cohn had a 26-year career at Goldman Sachs, starting in 1990 and made partner in 1994 while working in the London business.

In July, Politico reported that Trump might replace Yellen with Cohn, citing one Republican close to the selection process as saying, "It's Gary's if he wants it, and I think he wants it".

Cohn, dyslexic son of a blue collar family, does not have an Ivy League academic record and jokes that he only scraped through college through hard work and into Wall Street through his powers of persuasion.

His track record on monetary policy is unclear, though there are reports he leans towards Yellen’s preference for gradual rate hikes.