Washington
\n CNN
\n \u00a0\u2014\u00a0<\/p>\n
\n President Donald Trump said last week that he will announce his pick to succeed Federal Reserve Chair Jerome Powell \u201cvery soon.\u201d The problem is that Powell still has 11 months left until the end of his term.\n <\/p>\n
\n Trump remains frustrated as ever with the Fed because it has not yet lowered interest rates. He has relentlessly attacked Powell<\/a> for months. But announcing a Fed chair nominee this far in advance \u2014 if he makes good on that plan \u2014 would be an unprecedented development in the central bank\u2019s 111-year history.\n <\/p>\n \n This person would effectively be acting as America\u2019s \u201cshadow\u201d Fed chair \u2014 a proposal Scott Bessent first floated last year before he became Trump\u2019s Treasury secretary. Such an extraordinary move could undermine the current Fed chief and intensify the uncertainty<\/a> that has bedeviled the US economy since Trump took office, former Fed officials and academics tell CNN.\n <\/p>\n \n On Friday, Trump took the idea one step further, saying he specifically wants someone in the job who will cut interest rates.\n <\/p>\n \n \u201cI\u2019d love him (Powell) to resign if he wanted to. He\u2019s done a lousy job,\u201d Trump said at an Oval Office event, adding that he plans to replace Powell with someone who would quickly cut interest rates: \u201cIf I think somebody\u2019s going to keep the rates where they are, or whatever, I\u2019m not going to put them in.\u201d\n <\/p>\n \n \u201cI\u2019m going to put somebody that wants to cut rates. There are a lot of them out there,\u201d he continued.\n <\/p>\n \n But the idea of a shadow chair drew concerns from a number of experts who spoke to CNN.\n <\/p>\n \n \u201cIt\u2019s an absolutely horrible idea,\u201d Alan Blinder, who served as the No. 2 official at the Fed during the mid-1990s, told CNN in a phone interview.\n <\/p>\n \n Blinder said a shadow Fed chair would mean markets would have to make sense of two influential voices speaking about monetary policy at the same time, but offering potentially very different visions.\n <\/p>\n \n \u201cIf they\u2019re not singing from the same playbook, which seems likely, this is just going to cause confusion in markets,\u201d said Blinder, a former Clinton economic adviser who is now a professor at Princeton University.\n <\/p>\n \n Greg Valliere, chief US policy strategist at AGF Investments, expressed a similar sentiment in a note to investors on Thursday: \u201cThis is a terrible idea, sure to annoy and confuse financial markets if there are two Fed Chairs.\u201d\n <\/p>\n \n \u201cIt all depends on just how loyal this person is expected to be to Trump,\u201d said Kathryn Judge, a professor at Columbia Law School who researches financial markets and central banking. \u201cBut we don\u2019t we know what the ramifications would be or what they\u2019d be willing to do, because this is unprecedented.\u201d\n <\/p>\n \n US presidents have historically waited until the final months of the incumbent Fed chair\u2019s term before naming a successor.\n <\/p>\n \n RSM chief economist Joe Brusuelas cautioned that naming an early Fed chair could backfire, causing a jump in the very interest rates Trump is seeking to drive lower.\n <\/p>\n \n \u201cUndermining Powell is in no one\u2019s best interest as it will almost certainly translate to a weaker dollar and rising rates,\u201d Brusuelas said.\n <\/p>\n