NEW YORK, Nov 22 (Reuters) - Federal Reserve Chair Jerome Powell was nominated for a second four-year term by President Joe Biden on Monday, extending a tenure that began somewhat by chance, survived blistering criticism from former President Donald Trump, and now positions the ex-investment banker to finish the most consequential revamp of monetary policy since the 1970s.
Lael Brainard, the Federal Reserve board member who was the other top candidate for the job, will be vice chair, the White House said. read more
MARKET REACTION:
STOCKS: The S&P 500 (.SPX) were up 0.72% after futures reacted positively to the news.
COMMENTS:
JOE SALUZZI, CO-MANAGER OF TRADING, THEMIS TRADING, CHATHAM, NEW JERSEY
“It is stability which is good. The market doesn't like changes and volatility. However, some people think that Powell has let inflation get out of control and hasn't really made a move for fear of political or other reasons. Now that could be a bad thing because that person who's now in-charge is going to continue to potentially go too slow. And that’s the main thing, no one really knows if he is going too fast or too slow or if the inflation is really transitory.”
MICHAEL BROWN, SENIOR ANALYST, CAXTON, LONDON
"Knee-jerk rally in the dollar looks to be driven more by a position unwind of those short expecting Brainard than anything else. Maintaining the status quo of Powell shouldn’t change the outlook materially."
PETER TUZ, PRESIDENT, CHASE INVESTMENT COUNSEL, CHARLOTTESVILLE, VIRGINIA
“My reaction is one of relief. He was a steady hand, I think people liked in general the policies that he enacted since Covid first became an issue. Some valid criticism on whether he has been as forthright on inflation and the need for corrective action to keep it from getting out of control. That is kind of valid criticism. But all in all he is liked by both parties, he has been a pretty stable force.”
“I thought the world could adjust to Lael Brainard ok. This is in the market that she might be nominated. So I thought that wouldn’t have been a big negative."
JUAN PEREZ, FX TRADER AND STRATEGIST, TEMPUS CONSULTING, WASHINGTON
"At the moment, it seems the buck is welcoming news of Powell's continuation, and we believe it is fair since he has steered the ship that is monetary policy relatively well throughout unprecedented times. Naturally, Lael Brainard, the more dovish potential candidate, not getting the nod is a break for those who strongly believed she would match the dovishness of ECB's Christine Lagarde. We think this combo of China stimulus, Japan stimulus, and hesitation from central banks on the other side of the Atlantic plays well for the buck and only impressive indicators can change that tune."
MAZEN ISSA, SENIOR FX STRATEGIST, TD SECURITIES, NEW YORK
“What I think it does do is that because there was a non-trivial chance - that betting markets had Brainard at about 30% taking the Fed chair - it does leave a bit of a hawkish feel from a markets’ perspective, just as the market needs to price out some of that expectation that Brainard had a chance of getting nominated.”
“It’s a little bit more supportive for the dollar on the margins. Certainly now, Powell does not need to pay lip service to the prevailing narrative at the Fed in terms of inflation and all of that, so I suspect that, especially as the mid-terms come around and the renomination process comes up, I’m sure you’re probably see a lot more context about inflation and I think he can be a little bit more transparent in that regard.”
“It also helps solidify the notion that you may have a little bit more of a pragmatic Fed. Whereas Brainard is viewed as an unambiguous dove, having her as a vice-chair I think creates some balance in terms of top line messaging, but there are still a number of vacancies on the Federal Reserve committee and there is a good chance that you may see some dovish names that get put in place.”
BRAD McMILLAN, CHIEF INVESTMENT OFFICER, COMMONWEALTH FINANCIAL NETWORK, WALTHAM, MA
“It’s a vote for continuity, it’s a vote for confidence and the path the Fed has been on. It’s a nod to the fact that markets might not have been as happy about Brainard. Markets are interpreting it correctly as the Biden administration saying we are not going to go down towards the (modern monetary theory) path, we are going to stay the steady course. It is a vote to not change things as much as perhaps some of the legislation moving through Congress would suggest is being changed.”
RICK MECKLER, PARTNER AT CHERRY LANE INVESTMENTS IN NEW VERNON, NEW JERSEY “It's certainly being viewed in a positive light by investors, who like to see continuity in policy because it makes it easier to make investment choices. From a banking stock perspective, there was a lot of fear that if he wasn't chosen, and she was chosen, there'd be much more scrutiny and problems for the banking sector.”
JOHN DOYLE, VICE PRESIDENT OF DEALING AND TRADING, TEMPUS INC., WASHINGTON
“The decision was mostly expected. I think the knee jerk reaction is one of relief for markets because Powell is a known entity and we know what to expect from him. I would not call him the hawkish pick but he is less dovish than Brainard. The dollar is gaining as interest rate hike expectations begin to firm for next year.”
JACK ABLIN, CHIEF INVESTMENT OFFICER, CRESSET CAPITAL MANAGEMENT, CHICAGO
"The market will take it as welcome news, just because Chairman Powell was a known quantity. I think the doves were hoping for Lael Brainard, who I think is even more dovish than Powell. I can't say it was widely expected, but it was certainly one of the outcomes that was expected."
"The oversight role is still a risk for the banks. And so that's something we're going to pay attention to."
GREGORY DACO, CHIEF U.S. ECONOMIST, OXFORD ECONOMICS, NEW YORK
"It's probably the best of all outcomes. You maintain a dynamic duo at the helm of the Fed, you ensure continuity from a policy perspective, and you essentially have two of the most apt candidates both as Fed chair and Fed vice chair for the near future. I think it's a sound decision. It's one that will ensure that the Fed has the right type of personnel to guide us through the second part of this recovery phase, which will be a tricky one with high inflation and questions as to whether the Fed needs to tighten monetary policy or not."
"I would expect confirmation in the Senate to be certainly straight forward given that Powell has strong bipartisan support. Even if he loses a couple of votes on the Democratic side, he should get through Senate confirmation."
RANDY FREDERICK, MANAGING DIRECTOR OF TRADING AND DERIVATIVES, CHARLES SCHWAB, AUSTIN, TEXAS
"Markets like predictability and so they are reacting positively. They don't like uncertainty and while Brainard may have been a fine choice, the markets would not know what to expect from her even though the general consensus was that it meant lower rates for longer, but we don't know that for certain."
ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER AT DAKOTA WEALTH MANAGEMENT
"The markets are going to take this as a sign of relief."
"You're going to see some strength in financials today, as that relief comes to fruition, and the fact that Brainard is going to be vice chair at least puts some kind of pressure on Powell to not to move too quickly with raising rates."
"What I think the message is that we're on a course to reduce tapering and we're headed towards higher interest rates, which will most likely going to be raised in the middle of next year, and I think Wall Street has already digested most of that."
"This is sort of a another confirmation that the Fed has a plan."
DENNIS DICK, PROPRIETARY TRADER, BRIGHT TRADING LLC, LAS VEGAS
"The market likes certainty and we know what we get that with Powell. We know he is going to be accommodating. Obviously we've got an inflation issue and we know that with Powell that's not his primary concern. His primary concern has been to keep the economy going strong and that hopefully inflation would take care of itself.”
“Potentially with Powell coming back in there could be more inflation trade because that's not his priority.”
“The markets are flying this morning for the simple reason that they know what they get with Powell. I would go as far as to say Powell is one of the most accommodating Fed chair this market has ever seen.”
“But the question is what does that mean for inflation as it gets hotter and hotter? I'd be somewhat skeptical that it's all good news."
JOE MANIMBO, SENIOR MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON
“We’re seeing a knee-jerk move higher for the dollar now that we’ve finally got clarity on the Fed post. With Powell being renominated for a second term, that suggests a less dovish outlook for monetary policy than under a potential Brainard leadership. So, it looks like there’s greater scope for U.S. rate hikes under Powell with Powell remaining on as the Fed Chair and that has been broadly positive for the dollar.”
