Federal Reserve Chair Janet Yellen's departure looked as though it might leave the central bank's board with less than half the usual number of governors, creating what she described to Congress as a "rare and difficult situation."

But on Wednesday, Nov. 29, the same day that Yellen warned Congress about the shortage during what's likely to be her last testimony as chair, President Donald Trump nominated a Reagan-administration economist to one of the board's four open seats.

If confirmed, Marvin Goodfriend would be Trump's third appointment to the U.S. central bank, shaping monetary policy as a slow and steady recovery from the 2008 financial crisis gathers momentum. It's particularly significant since revitalizing the U.S. economy after a downturn that led to 10% unemployment in 2009 has fallen largely to the Fed, which employed near-zero interest rates and invested trillions of dollars in capital markets to spur growth while the rest of Washington was gridlocked.

"Goodfriend is well qualified" for the role, Deutsche Bank economist Matthew Luzzetti wrote in a report on Thursday, Nov. 30. "His appointment will add much-needed expertise on macroeconomics and monetary policymaking to a board that has already lost one heavyweight in this area in Stanley Fischer and will lose another when Janet Yellen retires."

When Yellen, 71, announced this month that she would also relinquish her role as a governor after her successor as chair, 64-year-old Jerome Powell, is confirmed, the panel's membership appeared likely to dwindle to three instead of the usual seven. It's a quirk of the organization's structure that its chairs, who serve four-year terms, are also governors, who can hold their seats for 14 years. 

Each of the governors also sits on the Federal Open Market Committee, which sets short-term interest rates intended to foster stable economic growth and maximum employment. The monetary policy panel also includes five regional Fed presidents, who have gained heightened influence with the open governorships.

Of Trump's other appointments, Randy Quarles, 60, took office in September and Powell is awaiting a Senate vote.

A professor of economics at Carnegie Mellon University's Tepper business school, Goodfriend holds a doctorate from Brown University and was director of research at the Federal Reserve Bank of Richmond from 1993 to 2005. He was a visiting economist at the Federal Reserve in Washington, D.C., in 1982-83 and a senior staff economist in Ronald Reagan's White House from 1984-85.

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On the Fed's board, Goodfriend is likely to support further increases in interest rates, which the central bank has raised only four times since the financial crisis, Deutsche Bank suggested.

While another 25 basis-point increase is projected in December, which would take rates to a range of 1.25% to 1.5%, policymakers have been torn between keeping rates low enough that inflation can climb to the 2% rate they view as stable and concern that acting too slowly will allow the economy to overheat. Inflation was 1.6% in the 12 months through October, based on the Fed's preferred measure of price increases.  

Three years ago, Goodfriend testified to Congress that the Fed needed a stronger commitment to capping inflation at its target rate, in order to avoid spiking premiums for long-term bonds and household fears that price increases might outpace retirement savings.

His background at the Richmond Fed, whose presidents have generally held hawkish views on interest rates, may also prompt him to lean toward increases, Deutsche Bank's Luzzetti wrote. 

The pace of the Fed's actions is pivotal for banks from JPMorgan Chase & Co. (JPM) - Get Report to Citigroup Inc. (C) - Get Report and Bank of America Corp. (BAC) - Get Report , which typically boost their margins by passing increases on to borrowers more quickly than depositors. Their interest revenue has climbed since the Fed first moved rates off the so-called zero bound in late 2015, a welcome change from seven years of crimped returns.

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While Goodfriend has expressed support for using negative interest rates in economic emergencies rather than so-called quantitative easing through which the Fed more than quadrupled its portfolio to $4.5 trillion, he probably wouldn't be able to garner sufficient support among current monetary policy committee members to accelerate the unwinding of that portfolio, Luzzetti wrote.

His qualifications for the role are unquestioned, however, and his experience in the Reagan administration, along with a willingness to criticize the Fed and a stated openness to more Congressional oversight, will likely appeal to Republican lawmakers, Luzzetti wrote.

"He's one of the world's premier monetary economists," Robert Dammon, dean of the Tepper school where Goodfriend has taught for the past 12 years, said in an interview. "Having spent time actually doing policy work at the Richmond Fed and academic work, he's really good at taking what he learned from practice to make his research better, to improve the theories that he's working on, but then also at taking the theory that he's working on to improve practice."

At Carnegie Mellon, Goodfriend's economics courses were popular even with students pursuing degrees outside of business because of his ability to "explain complex ideas to people who are not necessarily experts in the area," Dammon said. It's a skill that also serves him well in Congressional testimony.

"He understands his audience" and is capable of bringing dry theory to life, the dean said. "He will speak the language he needs to speak for the audience that he's facing. When he's talking in front of a trained economist, he will speak their language in a different way than he would when talking to undergraduates."

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