(CN) — President Donald Trump on Thursday formally announced Federal Reserve board member Jerome Powell as the next chairman of the nation's central bank, succeeding Janet Yellen.
Trump's pick, widely expected for more than a week, was announced at a White House ceremony.
Powell said he was both "honored" and "humbled" to be offered the opportunity.
"I will do everything within my power to achieve the goals assigned to the Federal Reserve by the Congress: stable prices and maximum employment," he said.
Yellen congratulated her longtime colleague on his nomination, saying his "long and distinguished career has been marked by dedicated public service and seriousness of purpose.
"I am confident in his deep commitment to carrying out the vital public mission of the Federal Reserve. I am committed to working with him to ensure a smooth transition," the outgoing Fed chair said.
The president's selection process was the most public in the Fed's 104-year history. He had considered re-nominating Yellen, the first woman to lead the central bank, for a second four-year term. Her term will end in February. But in the end, he opted for Powell, a Republican, over Yellen, a Democrat.
Powell is widely seen as a safe choice, and he has been a solid supporter of Yellen's policies. When asked earlier this week why he opted for a change that really represents continuity at the Fed, Trump told Fox Business Network he wanted to put his own mark on the central bank.
If confirmed by the Senate, Powell would be the first Fed leader in nearly four decades to lack an advanced degree in economics. He has served on the Fed board since 2012 after a career as an investment manager through which he amassed personal wealth in the tens of millions.
The White House said Thursday that Trump's final decision came down to Powell, Yellen and John Taylor, a Stanford University economist.
Other candidates in the early running were Kevin Warsh, a former member of the Fed board, and Gary Cohn, his chief economic adviser.
In Powell, Trump chose a middle ground between sticking with Yellen, who had been chosen for the Fed job by President Barack Obama, and Taylor, who was critical of the Fed's response to the 2008 financial crisis and would likely have pushed for raising rates more aggressively than Yellen's Fed has.
Trump's decision against nominating Yellen for a second four-year term makes her the first Fed leader since the end of World War II not to be offered a second term after completing a first. The seven-member board has three other vacancies, meaning more nominees will be forthcoming.
Dean Baker, co-director at the Center for Economic and Policy Research, an economic think tank, was disappointed with the administration’s failure to reappoint Yellen.
“This decision broke with recent precedent in which presidents have reappointed first term Fed chairs, including those picked by a president of the opposite party. Trump’s decision, in this case, is especially striking since Yellen had done an extraordinary job as Fed chair by conventional measures,” Baker said, noting the drop in unemployment rates during her tenure.
“She accomplished all of this while keeping inflation well under control. In this respect, it is worth noting that Yellen, the first woman to serve as Fed chair, is effectively being fired, in spite of doing an outstanding job during her tenure,” Baker said.
Yellen and Powell’s disparate level of experience also troubled him, he said, especially when he thinks of how Powell could respond “when conditions in the economy change.”
“Yellen’s departure as Fed chair is a major loss to the country,” Baker added.
Shawn Sebastian, co-director of the Fed Up campaign, an offshoot of the nonprofit Center for Popular Democracy, was critical of Yellen’s replacement, saying Trump missed an “easy two-foot putt” that should force the question – is the president’s priority really “jobs, jobs, jobs,” Sebastian said.
“Jerome Powell's most important qualification is that he served with Janet Yellen. Powell’s confirmation should depend on his willingness to follow in Yellen's footsteps on both monetary and regulatory policy. Senators should carefully scrutinize his views to determine whether he will continue the prudent course Yellen has charted on monetary policy, and maintain the financial protections that the Board of Governors has put in place,” Sebastian said.
Though there is a need for more diversity at the Fed – only one woman will sit on the board after Yellen’s departure, federal governor Lael Brainard – FedUp gave Powell credit for his speaking out on the issue.
Powell made calls for it at the March speech, saying the fed should “strive to have diversity in gender and race both at the Board and at the Reserve Banks.”
“Powell can act on his verbal commitments to diversity by advocating that Donald Trump appoint women, people of color, and labor and consumer advocates to the Board of Governors, by only approving the appointment of Regional Reserve Bank Presidents that further his diversity goals, and by increasing the representation of these groups in the selection of regional bank Class C board members, which he will control,” Sebastian said.
The Fed chair's job is the government's top economic policy post. The chairman has only one vote on the Fed's committee of board members and regional bank presidents who set interest rates, but is critical to achieving consensus.
The central bank's power derives from its ability to raise and lower the federal funds rate, the benchmark that banks use to set consumer and business loans. It's a true balancing act. If the Fed gets it right, employment thrives and inflation remains stable. However, if it gets the balance wrong, inflation rises and the economy grows sluggish.
Under Yellen, the unemployment rate has reached a 16-year low of 4.2 percent. But inflation has remained chronically below the central bank's 2 percent target.
On Wednesday, the Fed announced it was keeping its benchmark rate unchanged but hinted that it's preparing to resume raising rates modestly in light of a consistently solid economy.
In a statement after its latest policy meeting, the Fed left its key rate in a low range of 1 percent to 1.25 percent. It's expected to raise rates for the third time this year when it next meets in December.