WASHINGTON — President Trump nominated Jerome H. Powell to chair the Federal Reserve on Thursday afternoon, bypassing Janet L. Yellen for a second term but turning to a replacement who is expected to stay the course on monetary policy if the economy continues its steady growth.
“He’s strong, he’s committed, he’s smart,” Mr. Trump said in the Rose Garden, where he introduced Mr. Powell as his choice. Using Mr. Powell’s nickname, the president said, “Based on his record, I am confident that Jay has the wisdom and leadership to guide our economy through any challenges that our great economy will face.”
Less certain is where Mr. Powell would lead the Fed if the economy falters. Mr. Powell, a member of the Fed’s board of governors since 2012, has consistently voted with Ms. Yellen, and colleagues consider him a centrist and pragmatist. But his tenure as a central banker has been relatively brief, and he has expressed skepticism in the past about the unconventional measures that the Fed has taken in the wake of the severe recession of 2008 and 2009.
Mr. Powell could also depart from the Fed’s current trajectory when it comes to regulating banks and other financial institutions — rules Mr. Trump has said should be loosened.
Mr. Powell is a Republican with deep roots in the party’s establishment and in the financial industry, a lawyer by training and investment banker by trade. As chair, a position some consider as the second most powerful post in government, he will be the voice of an institution that is charged with keeping the economy on track by adjusting interest rates that influence the decisions of millions of Americans.
In replacing Ms. Yellen, Mr. Trump is breaking with precedent. The previous three Fed chairman were reappointed, in each case by a president of the opposite political party.
Mr. Trump said that he respected Ms. Yellen and on Wednesday called her “excellent.” The Fed under her leadership has sharply reduced unemployment while maintaining control of inflation, coming as close to achieving its congressional mandate as at any time in its history. But Mr. Trump and his advisers wanted to pick their own Fed chairman.
The position requires Senate confirmation, but Mr. Powell is likely to attract broad support from the Republican majority. He won some Democratic votes when he was confirmed as a Fed governor in 2012, and when he was confirmed again in 2014.
Most expect Mr. Powell to maintain the slow but steady approach that Ms. Yellen has taken in raising rates and unwinding the portfolio of assets that the Fed purchased to boost the economy after the 2008 financial crisis. Mr. Powell remains a centrist voice in the Fed’s internal debates, arguing for the Fed to end its stimulus campaign at a slow and steady pace. Over the last year, that has placed him solidly among the majority led by Ms. Yellen.
“Our view is Powell is the G.O.P. version of Yellen, with the added kicker of wanting to reduce regulation,” said Tom Porcelli, chief United States economist at RBC Capital Markets. He said Mr. Powell was “the easy choice if you want to maintain continuity.”
But some argue that there is more uncertainty surrounding Mr. Powell’s approach than for other recent Fed chairs. Lewis Alexander, chief United States economist at Nomura Securities, said it is unclear how aggressive Mr. Powell would be in responding to an economic slowdown.
“I don’t think it’s right to think of Powell as a Yellen clone,” Mr. Alexander said. “In terms of the core issues of monetary policy, we just don’t have much of a baseline for him.”
Mr. Powell would also be the first Fed chair in four decades who does not have a degree in economics — meaning he lacks a body of academic work that analysts can parse for his views.
Ms. Yellen’s work on the labor market and former Fed chair Ben Bernanke’s focus on financial crises both gave insight into their leadership at the Fed, said Sarah Binder, a political scientist at George Washington University. But beyond Mr. Powell’s performance as a “loyal lieutenant” to Mr. Bernanke and Ms. Yellen, “we don’t know all that much about any existing priors Powell has about monetary policy,” she said.
As a member of the Fed’s board of governors, Mr. Powell also raised concerns that the Fed was trying too hard to revive economic growth with its massive bond-buying program — calling into question whether he would be as willing as Mr. Bernanke and Ms. Yellen to use such tools again.
The Fed announced in September 2012 that it would launch a third round of bond buying, purchasing $85 billion a month in Treasuries and mortgage-backed securities until economic conditions improved to its satisfaction. The program was backed by Mr. Bernanke, then Fed chair, and Ms. Yellen, then the vice chairwoman, who argued the Fed had not done enough to reduce unemployment.
A group of three Fed governors, including Mr. Powell, pressed Mr. Bernanke to clarify the Fed’s goals, establishing what Mr. Powell called an “off-ramp” for the program. Jeremy Stein, the Harvard economist who was a governor at the time, described his concerns in public speeches, but Mr. Powell characteristically worked behind the scenes, raising his concerns with Mr. Bernanke in private conversations.
Mr. Bernanke responded by announcing a wind-down plan in May 2013, but fear of a premature retreat caused a “taper tantrum” in financial markets. The Fed ended up continuing the purchases for longer than it had expected.
A survey of 144 investors conducted by Evercore ISI found investors expected that Mr. Powell would push rates modestly higher over time compared to Ms. Yellen.
Coming appointments could also complicate Mr. Powell’s task of forging consensus at the Fed. The president has three more open seats on the board of governors, and may have a fourth if Ms. Yellen decides to step down from her position on the board as she departs as chair. Mr. Trump may decide to appoint John Taylor, a Stanford economist who is among the Fed’s most vocal critics, and who was a top choice for Fed chief along with Mr. Powell.
Mr. Powell may also diverge from his predecessor on financial regulation. In a June appearance before the Senate Banking Committee, Mr. Powell made clear that he did not fully embrace the Trump administration’s plans for significant reductions in regulation, released a few weeks earlier, but said that the Fed’s current rules showed opportunities for improvement.
“I see it is a mixed bag,” he said. “There are some ideas in the report that make sense, maybe not as expressed there, but it would enable us to reduce the cost of regulation without affecting safety and soundness.”
But, he continued, “There are some ideas that I would not support.”
He could face significant internal pressure, however. Mr. Trump already has chosen Randal K. Quarles, the Fed’s vice chairman of supervision, to lead the push against regulation. The two men were colleagues at the Carlyle Group.
Mr. Powell has expressed support for legislation that would require financial regulators to apply cost-benefit analysis to proposed rules. But he pushed back against proposals to allow large banks to borrow more of their funding, saying that requiring large banks to raise capital from investors had strengthened the financial system.
“I happen to think we’ve gotten it about right,” he said.
Mr. Powell, 64, is a Washington native. He studied politics at Princeton University, then earned a law degree from Georgetown University and embarked on a career in investment banking at Dillon Read and Co.
In 1990, he returned to Washington to work for Treasury Secretary Nicholas Brady. Mr. Powell was named under secretary for finance. When Salomon Brothers was caught in an attempt to manipulate the market in Treasuries, Mr. Powell spent a long August weekend making phone calls from Cape Cod, arranging for the company’s top managers to resign and for Warren Buffett, a major investor, to become chairman of the company’s board.
Under pressure to account for the shortcomings in regulation that had allowed Salomon’s misconduct, Mr. Powell told Congress, “There is no question that it can be improved, and improve it we will.”
Mr. Powell joined the private equity firm Carlyle Group in 1997. Over the next eight years, he solidified his fortune. His 2016 financial disclosure form showed a net worth of as much as $55 million. In 2005, Mr. Powell left the firm to focus on public policy as a scholar at the Bipartisan Policy Center.
He attracted the attention of the Obama administration in 2011, when he worked behind the scenes to convince Congressional Republicans to raise the debt ceiling. The following year, President Obama nominated Mr. Powell to the Fed alongside Mr. Stein, a Democrat. The package deal was meant to attract bipartisan support, and both men were quickly confirmed.
In an interview, Mr. Stein described Mr. Powell as “a determinedly not dogmatic guy.” “He completely checks any kind of ideology at the door,” he said.