Jerome Powell, Fed's New Chair, Needs a Policy Rule

President Trump has nominated Jerome Powell to be the next Federal Reserve Chair, ending speculation over who will succeed Janet Yellen as chief monetary policymaker. The President's pick also removes an important element of uncertainty associated with the transition between Chairs, because Powell – already a member of the Fed Board since 2012 – has expressed approval of Yellen's plans to raise rates gradually, while also scaling back the size of the Fed's balance sheet, during the coming years. But even as he provides continuity at the Fed, Powell has an opportunity to enhance the institution's credibility and thereby make his own positive contribution to the policymaking process. He can do this by describing the Fed's actions under his leadership with consistent reference to a monetary policy rule.