President Biden nears a Fed chair decision

Yahoo Finance Video

Tue, Nov 16, 2021, 7:26 AM

JULIE HYMAN: With all of this spending that is going on-- consumers saying they're not very confident but spending the money anyway-- prices going up-- there is a challenging picture, perhaps, for the person who is at the top of the US central bank. Who will that person be? Will it be Jay Powell? Will be Lael Brainard? We don't know. But the decision seems to be getting a little bit closer.

Brian Cheung is afraid to go out for coffee because the decision could come at any time. We heard yesterday that there was a report that it was imminent. But I guess imminent is like transitory-- it depends on who you ask what it means, Brian.

BRIAN CHEUNG: Yeah, no, I'm terrified. Every time I step out of the house is like, is this going to be the moment that Biden's going to announce something, while I'm stepped out of the house? But yes, indeed. It is indeed the case that apparently the White House is inching a little bit closer to a decision on who they want leading the nation's economic steward of the Federal Reserve.

A report coming from Bloomberg yesterday that Senate Banking Committee chair Sherrod Brown, Democrat from Ohio, reportedly telling that publication that a decision would be imminent and that apparently the top job of the Fed Chair is coming down to Jay Powell, who's the incumbent, or Federal Reserve Governor Lael Brainard. Now, of course, when you talk about the odds of who's favorited right now-- at least when you look at predictive markets, which might be a bit inaccurate in terms of whether or not they have an accurate pulse on what the White House deliberations are-- but Jay Powell does still appear to be the favorite, based on those betting markets at around-- I think it was $0.63 or so earlier this morning.

Lael Brainard would be the second place there, around $0.30 as of this morning. Some other dark horse candidates like the likes of Sarah Bloom Raskin, Roger Ferguson, or Raphael Bostic also on the board, although they are pretty much kind of out of the running based off of what we heard, because the White House did have meetings apparently with Jay Powell and Lael Brainard at some point last week. Now, of course, the White House has been very tight-lipped on all of this.

I tried to reach out to them. They've had no comment with regards to whether or not they are getting closer to a decision or who the finalists might be. But also consider that it's going to be likely the case that the White House want to do this as a slate of nominations. So in addition to the Fed Chair, maybe also trying to bring up two more candidates to fill out one vacancy, and then to replace the vice chairman Richard Clarida, whose term ends in January.

So a lot of musical chairs going on here. We'll see when that announcement comes. But again, it seems like the White House getting a little bit closer to an announcement on the Fed nominations right there.

BRIAN SOZZI: Brian, why is Lael Brainard seen as more dovish to markets than Fed chief Jay Powell?

BRIAN CHEUNG: Well, I actually have to say that it's not even so clear that that's the case. So there's a lot of commentary out there that certainly says, oh, well, Lael Brainard would be more supportive of easy money policies than the Fed chairman right now. But consider, for example, that the Fed has already put into motion a plan to start paring back its accommodation, right? At the beginning of this month, they announced that they'd be slowing the pace of their asset purchases by about $15 billion per month.

That would be on track to wrap up the entire program of asset purchases by the middle of next year. There's no reason to think that if Lael Brainard is put up as the head of the Fed, that she would reverse that. And one reason is because we know that she supported that because she is an existing Fed governor who voted in favor of that movement at the beginning of this month to start to taper its asset purchases.

So yes, it is indeed the case that she has made more emphasis on trying to get maximum employment and hasn't been as concerned about the inflationary side of things, so maybe her reaction function will be a little bit slower. But the Fed has a framework for dealing with all of this. They have the same metrics that they've been looking at through this recovery, and there's no reason to think that that would change under a Brainard-led Fed. But again, we would have to see what that looks like if she is ultimately first nominated by the White House, secondly, if she can get approved by the Senate, and then third, what her messaging would ultimately be as a Fed chair, if she is ultimately passed through by the Senate. All looming questions that hopefully we'll get some clarity on in the weeks to come.

JULIE HYMAN: So even if the decision on the announcement on his pick comes, your work is far from done, Brian Cheung.

BRIAN CHEUNG: Yeah.

JULIE HYMAN: Oh, well. That's all right. At least you'll be able to get coffee again.

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President Biden nears a Fed chair decision

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