Richard Portes on prospects for Fed chair and the US economy

In a lively Bloomberg UK interview, London Business School’s Professor Richard Portes laid out the stakes for the next US Federal Reserve chair - and why the job may soon require threading the impossible needle.

Christopher Waller, a current Fed governor and the leading candidate for the role, has met with the president’s team but not yet with Donald Trump himself.

Portes warned that the incoming chair will likely face stagflation - rising inflation alongside a weakening labour market - a "nightmare scenario for central bankers". "Cut rates, and inflation could flare; keep them high, and jobs will suffer." Political pressure, Portes observed, only sharpens the dilemma.

Despite occasional policy disagreements, Portes praised Waller as “a very good economist… absolutely straight, honest, and he won’t cave to pressure” - qualities that, he quipped, “may of course disqualify him” if Trump is seeking a compliant “yes-man.” He dismissed other potential names: Kevin Hassett would be “a disaster,” while Kevin Warsh at least understands the value of Fed independence.

Portes was less charitable about another possible appointment, Stephen Miran, noting his “self-contradictory” positions on fiscal policy and branding his claim of a “permanently overvalued” dollar as “nonsense.” Exchange rates, Portes stressed, fluctuate - always have, always will.

His bottom line: the international community would welcome Waller, but the real test will be whether the White House wants an independent Fed - or just someone who says yes.

To listen to the full recording, click here: https://lnkd.in/ecPntqTa.