Why Trump's Fed chair decision may not be as important as you think

Whether President Donald Trump decides to reappoint Janet Yellen as Fed chair or selects someone else, the central bank will continue to hike interest rates and run down its massive balance sheet, a portfolio manager says.

"In the short term, it really doesn't matter who it is, because the Federal Reserve will continue to raise interest rates by we believe three times over the course of the next 12 months," Washington Crossing Advisors' Chad Morganlander said on CNBC's "Trading Nation."

Whether it's Yellen, Fed Governor Jerome "Jay" Powell or Stanford economist John Taylor, who are both seen as leading candidates, the Fed will also reduces its multitrillion dollar balance sheet, Morganlander added in the interview Friday.

"Regardless of who gets appointed, we believe that there will be a gradual balance sheet decline in 2018, and potentially that will accelerate going to 2019, as well as 2020," he said.

Yellen's term as chair expires in February.

In two to four years, "that's where the real debate comes and where the concern is," Morganlander said. "If it's John Taylor, then the rate hikes in the outer years could be much greater, where we believe if Janet Yellen or Powell gets appointed, then perhaps the neutral rate will be substantially lower," Morganlander said.

Market participants largely believe Trump will select Powell as the next Fed chair, but Yellen is still seen as the most favorable for the post, according to the CNBC Fed Survey of 47 respondents. Taylor and former Fed Governor Kevin Warsh are also seen as leading contenders.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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