What's going on?

Big news! US President Donald Trump announced on Thursday that Jerome Powell, currently a governor of the Federal Reserve (�the Fed�), will take over as its chairman in February � putting Powell in charge of the world�s most powerful central bank!

What does this mean?

Although a central bank typically reaches decisions through a committee of experts, its chairman acts as its official mouthpiece on monetary policy (stuff like setting interest rates) and has historically played a major role in setting the committee�s direction � so this is a major decision!

Powell was seen as a �dovish� continuity candidate for the post � meaning that he is thought to favor the Fed�s existing plans for relatively slow interest rate rises. He�s also rumored to be more light-touch on bank regulation, which seemingly made him more attractive to the White House (which tends to lean towards removing restrictions on businesses, including banks).

Why should I care?

For markets: Goldilocks Powell wants rates �just right�.

US government bond prices shot up as media leaks in recent days suggested Trump would appoint Powell (bonds tend to go up in price if it seems like interest rates will stay low). Still, it�s expected that Powell will raise rates at a moderate pace. He�ll need to find just the right tempo: too rapid a rise could discourage spending and harm economic growth. However, too slow could encourage investors to make risky choices that ultimately lead to certain investments becoming overpriced � and later crashing (like the sort of crash that caused the 2008 financial crisis).

The bigger picture: Powell will be inheriting a slightly more �normal� economy by historic standards.

In the US, economic growth is ramping up and unemployment is hitting historic lows. Almost a decade ago, when financial markets went into meltdown, the Fed (and other central banks) assumed heightened importance as they responded with historically low interest rates and unconventional policies. Assuming the economy holds up, Powell will likely aim to continue on the path of his predecessor to bring monetary policy back in line with historical �norms�.