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When on November 9, deep after midnight, it became known that Donald Trump would become the next president of the United States, many expected that it would mean a complete overhaul of the Fed, with a radical shift in the bank’s monetary policy as one of the consequences.

After all, during the election campaign, Trump repeatedly stated that, among many other things, he would find a higher official interest rate desirable, and that he did not agree with the Fed’s monetary policy. The Fed Chair, Janet Yellen, should have been ashamed of herself, according to Trump, for the monetary policy that was pursued under her leadership. Since her term ends at the beginning of 2018 and it should, therefore, become clear in the course of this year whether she will be reappointed and given the fact that Trump will decide whether or not she will be reappointed, the fate of Yellen as future Fed Chair appeared to be sealed.

Add to that the two FOMC vacancies and the fact that the current Vice Chair, Stanley Fischer, will step down in 2018 as well, and many arrived at the conclusion that the Fed would very soon have an entirely new monetary squad in place. A monetary squad that would raise interest rates faster than expected. Why? Because the FOMC would consist of mere Trump-appointees and Trump himself, as we remarked earlier, was not a big fan of current monetary policy and said higher interest rates were desirable.

On December 16, I wrote that I was skeptical about this suggested radical shift in monetary policy with the election of Trump: “Do not forget that Trump argued in favor of higher interest rates during his election campaign. Now that he became president, I highly doubt whether he continues to be happy with a series of rate hikes.”

Respect for Yellen

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