President Trump Will Nominate 2 “Hawks” to Fed Board
US President Donald Trump’s picks for the 2 open spots on the Fed Board of Governors may push for tighter monetary policy if they receive the Senate confirmation needed to join the interest rate-setting panel.
President Trump will nominate Carnegie Mellon University professor Marvin Goodfriend, 66 anni, and former Treasury Department staffer Randal Quarles, 59 anni, to fill 2 of the 3 open seats on the Federal Reserve’s Board of Governors according to reports.
The conservative picks come as Fed Chairwoman Janet Yellen lay out plans to shed some of the trillions of dollars of bonds bought in the wake of the Y 2008 financial crisis.
Mr. Goodfriend in particular has been skeptical of the Fed’s bond-buying programs, saying that it is too close to fiscal policy.
Mr. Goodfriend ia a former Richmond Fed policy advisor, and has urged the central bank to adopt simpler rules governing policy decisions.
That view has support among many congressional Republicans, though Ms. Yellen has strongly opposed their proposed legislation on grounds that it would tie the Fed to make mechanical decisions that would harm the economy.
The rule at the center of that legislation suggests the Fed should be raising rates more aggressively than the 3 annual rate hikes policymakers currently expect for Y’s 2017 and 2018.
That may make for an interesting dynamic with bond investors increasingly skeptical of faster rate hikes amid uncertainty over the outlook for tax cuts under The Trump Administration.
After Friday’s report that employers added fewer than expected jobs in May, short-term interest-rate futures traders were still pricing in a June rate hike, but Treasury yields fell as investors reduced bets on subsequent hikes.
One area Mr. Goodfriend may agree with Ms. Yellen is on the Fed’s plan to start shrinking its $4.5-T balance sheet before the end of the year. Though the Fed has not published its plan, policymakers have said the portfolio would shrink as if on “Autopilot.”
In an interview with Reuters last November, Goodfriend appeared to also support such a preset plan.
“The Fed should choose a rule for shrinking the balance sheet so that, as it sold off its assets, it was pre-committed and markets could anticipate sales and prepare for them,” he said. Despite differences of opinion with Ms. Yellen, he said then, “If there is interest in my point of view and my 30-something years of thinking, writing, and teaching about the Fed and central banking, then I would have to consider serving.”
Mr. Quarles worked on financial regulation at the Treasury for years, including during the Y’s 2007-2009 financial crisis.
Reuters has reported he was a leading candidate to be President Trump’s pick for the Fed’s Vice Chairman in charge of banking supervision.
Notably, if these 2 nominees are eventually confirmed, the tone of the Fed Board will swing to a more Hawkish mode.
Messrs Goodfriend and Quarles did not immediately respond to requests for comment.
A White House spokesperson said officials were not ready to make an announcement yet.
Have a terrific weekend.
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