Fed Trading Saga Seen Modestly Hurting Powell’s Second-Term Odds
(Bloomberg) -- Jerome Powell is widely expected to be renominated to a second term as Federal Reserve chair, but his chances have been modestly dented by the revelations of stock trading by some senior Fed officials in 2020, according to economists surveyed by Bloomberg News.
As President Joe Biden considers openings for the Fed chair’s job and other slots, 79% of the economists expect Biden to keep Powell in the job -- down from 89% in the September survey. Fed Governor Lael Brainard, a Democrat, is seen as the most likely alternative, with 13% of economists predicting she will be chosen as chair. Powell’s current term expires in February.
In October, the Fed announced it will ban top officials from buying individual stocks and bonds as well as limit active trading, moves which Powell said would assure Americans of the “single-minded focus on the public mission” of the central bank. Dallas Fed President Robert Kaplan and Boston’s Eric Rosengren both stepped down following revelations of unusual trading during 2020. Rosengren cited a chronic illness in announcing his early retirement.
The economists, who were surveyed from Oct. 22-27, were mostly supportive of Powell’s actions to tighten up Fed ethics rules, with 70% agreeing with the statement that they were forceful and appropriate, while 28% viewed the response as too tentative or slow.
Even so, Powell’s odds of reappointment could have been diminished at least a little bit by the trading disclosures and subsequent criticism. In the survey, 69% said Powell’s odds of reappointment have been curbed modestly and 7% said significantly, while 24% said there has been no change.
“Powell may become a pawn in the struggle between progressive and moderate Democrats,” said Philip Marey, senior U.S. strategist at Rabobank in Utrecht. “Biden could offer the replacement of Powell by Brainard to appease the progressives in exchange for concessions to the moderates.”
Besides Brainard, Fed Bank of Atlanta President Raphael Bostic and former Fed Vice Chairman Roger Ferguson were named by economists as the most likely pick as the new chair. Either would be the first Black to serve as Fed chair.
Biden has started to meet with top White House and Treasury aides to review candidates, according to two people familiar with the process, even as the White House has been largely consumed with negotiations over the size and contents of the president’s multi-trillion-dollar economic agenda.
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