Powell shouldn’t follow Greenspan’s example at Federal Reserve

Adam Jeffery | CNBC

Jerome Powell, Chairman of the Federal Reserve, speaking at the New York Economic Club on Nov. 181128.

Federal Reserve Chairman Jay Powell would be wrong to copy the playbook of his predecessor Alan Greenspan, according to a Yale lecturer and former Morgan Stanley executive.

Powell has been criticized by some market players, as well as by Donald Trump, who believe the central banker risks triggering a U.S. economic contraction by enforcing multiple rate rises next year.

In the 1990s, then Fed-chair Greenspan took a watch-and-wait policy, keeping rates low to see if inflation would materialize in the face of a growing economy. At the Federal Reserve’s annual retreat to Jackson Hole, Wyoming, in August, Powell praised Greenspan’s do-nothing stance as sound risk management.

But Stephen Roach, a senior fellow at Yale University and former chairman of Morgan Stanley Asia, told CNBC’s “Squawk Box Europe” on Friday that Powell would do well to learn from Greenspan’s mistakes.

“The Greenspan ‘put’ supported markets a lot, but he also gave us lots of bubbles and crises that were spawned by those bubbles which I think history does not treat kindly at all,” he said.

The veteran economist added that it was not “such a bad thing that Jay Powell is not a clone of Alan Greenspan.”