When Janet Yellen gives the reins of the Federal Reserve to Jerome Powell, it will be among the riskiest handoffs in history — navigating the U.S. through a likely economic slump in the coming years.

It has been a decade since the start of the last recession, and the economy is experiencing steady growth, with the stock market soaring to record highs. But with the expansion in its eighth year — already the third-longest in U.S. history — the Fed will have to make tough calls about how quickly to raise interest rates to head off inflation, and when to stop.


Those decisions will fall to Powell, President Donald Trump’s choice for Fed chair, if he is confirmed by the Senate.

“I’d put the odds of a recession over the next four years at better than 50 percent, which means he’s likely to face a recession at some point during his tenure,” said Gus Faucher, chief economist at PNC.

Trump has repeatedly emphasized his goal of achieving sustainable economic growth of 3 percent or more. That would be hard to deliver under any circumstances, but particularly if the Fed is pumping the brakes by pushing up rates — making it costlier for companies and individuals to spend and invest.

The central bank faces a balancing act to avoid becoming the cause of a recession. If it raises interest rates too quickly, without being warranted by strong gross domestic product growth, it could strangle the economy. But if it doesn’t raise rates fast enough, that could spur out-of-control inflation, which would lead the Fed to raise rates even more rapidly — potentially triggering a recession.

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So even though Powell will be inheriting a Fed that has come close to reaching its dual goals of full employment and price stability, that reality could change quickly.

“This is going to be a harder couple of years than the last couple of years for the Fed chair,” said Tim Duy, an economics professor at the University of Oregon.

“We’re going to be in a point in the cycle where it’s not obvious when you should stop raising interest rates,” he added.

If the economy starts to take a dive, Powell and the Fed could serve as a convenient scapegoat.

“It is an unthankful job to work at the Fed,” said Torsten Slok, chief international economist at Deutsche Bank Securities. “The Fed is constantly criticized by politicians and by markets and sometimes even by other central bankers.”

One big variable will be policies enacted by Trump and Congress. Fed officials have not yet weighed in on the House Republicans’ new tax bill, but if enacted, it could speed up the pace of inflation and cause the central bank to act more aggressively.

If Trump follows through on threats to withdraw from trade agreements, such as NAFTA, that could shock the economy by breaking up integrated supply chains and slowing growth.

“Someone like Jay is going to be very attuned to economic data but also to financial information, so I’m not that worried about the Fed causing a recession," said Glenn Hubbard, dean of the Columbia Business School.

"The concern would be more that something happens," he added. "It could be fiscal policy, or some kind of external shock, maybe something in the financial system. Those would be the things that worry me.”

Meanwhile, interest rates are still near historically low levels, with the Fed’s main borrowing rate sitting between 1 percent and 1.25 percent. That means if the economy does take a turn for the worse, the central bank has less room to lower rates and stimulate growth — requiring Powell to break out the unconventional policy playbook.

The Fed is in the process of unwinding some of the trillions of dollars in assets it bought in the wake of the financial crisis in a bid to stimulate the economy. Large economic shocks could cause the Fed to pause or even reverse that course.

Because Powell isn’t a formally trained economist, that could force him to lean more on his colleagues and the Fed staff in making tough calls. But multiple economists expressed confidence that this fact alone wouldn’t necessarily be a problem.

“I think what really would be the disqualifying factor would be if they were not willing to listen to the people they employ who are Ph.D. economists,” Duy said.

Powell isn’t viewed as having markedly different views on monetary policy from Yellen, which means he probably won’t be inclined to be overly aggressive in hiking rates.

“The committee has been patient in raising rates, and that patience has paid dividends,” Powell said in a speech in June. “While the recent performance of the labor market might warrant a faster pace of tightening, inflation has been below target for five years and has moved up only slowly toward 2 percent, which argues for continued patience, especially if that progress slows or stalls.”

And his background in financial markets could also work in his favor among congressional Republicans, who argue that the Fed’s academic approach has led to less practical policymaking.

“It’s about time we have somebody who actually understands the real world, who has real world experience,” Rep. Blaine Luetkemeyer (R-Mo.) said. “I think it’s very healthy that we have somebody in there who’s not a think tanker and can bring that experience to the table.”