Trump expected to name Powell as next Federal Reserve chair on Thursday

By Jeff Mason and Steve Holland

WASHINGTON (Reuters) - President Donald Trump is expected on Thursday to nominate Jerome Powell as the next head of the Federal Reserve, putting his own stamp on the leadership of the U.S. central bank while signaling continuity on monetary policy.

Trump's decision, scheduled for Thursday afternoon, concludes a months-long process in which he considered five finalists, including current Fed Chair Janet Yellen, before settling on Powell, who has served as a Fed governor since 2012.

Powell's name has been circulated as the top contender for over a week.

A source with knowledge of the process said no surprises were expected on Thursday, despite Trump's reputation for weighing decisions up to the last minute and his praise on Wednesday of Yellen, who was nominated by Democratic President Barack Obama. Her term as Fed chair expires in February 2018; she is entitled to remain a Fed board governor until 2024.

"I think Janet Yellen is excellent," Trump told reporters during a meeting with his cabinet after declaring his intention to announce his choice the next day. Asked if she was his pick, Trump said: "I didn't say that."

He predicted people would be "extremely impressed" with the nominee, who will require Senate confirmation.

Trump will announce his choice at 3 p.m. (1900 GMT) at the White House, according to his public schedule.

Powell, 64, has supported Yellen's general direction in setting monetary policy, and in recent years has shared her concern that low inflation justified continuing with a cautious approach to raising interest rates.

Commerzbank economist Bernd Weidensteiner said a Powell pick would mean Trump had chosen the "least controversial" person for the job. "Under his chairmanship, markets would expect business as usual - which they obviously like," he said.

The president has mulled his choices for Fed chair, a decision that is normally cloaked in secrecy, in an unusually public way, asking lawmakers and even a television news anchor to weigh in on whom they would pick.

Trump also considered Stanford University economist John Taylor, former Fed Governor Kevin Warsh, and White House economic adviser Gary Cohn.

Taylor and Warsh were both viewed as people who might raise interest rates faster than Yellen and Powell. Cohn appeared to fall out of favor after criticizing Trump's reaction to the violence in Charlottesville, Virginia, earlier this year.

Financial markets look set to greet Powell's appointment with a shrug. Investors are pricing in an interest rate increase in December and the Fed's current projections are for three more increases next year.

Powell is expected to pursue a policy of cautious deregulation of the financial sector, potentially freeing smaller banks from some of the rules imposed after the 2007-2008 financial crisis.

Powell, who has been a Federal Reserve board governor since 2012, played a key role in drafting new bank regulations after the crisis and will likely offer more continuity for Wall Street than other candidates, analysts said.

(Reporting by Jeff Mason and Steve Holland; Editing by Larry King)