Regulation may be deciding factor for next Fed Chair

The debate surrounding the four candidates who were interviewed to become the next Fed Chair has focused almost exclusively on how they might affect the monetary policy outlook, but we suspect it will be the winning candidate’s views on regulatory policy that will be the deciding factor. For that reason, we doubt current Chair Janet Yellen will be offered a second term since she is the only one of the presumed four candidates who has passionately defended the post-crisis tightening of financial regulation. Jerome Powell is the current favourite in betting markets, but we suspect his support for tighter regulation means that, in reality, Kevin Warsh is most likely to be nominated by the President.