Powell’s re-election brings stability to investors Reuters

© Reuters. File picture: On September 18, 2019, after the New York Stock Exchange (NYSE) announced the Fed interest rate, traders displayed a press conference of Fed Chairman Jerome Powell on the screen. REUTER

Authors: David Randall, Lewis Klauskopf and Shreyashi Sanyal

NEW YORK (Reuters)-US President Joe Biden continues to choose Jerome Powell because the Fed Chairman assured investors that they said that as the Fed is preparing to start raising interest rates and slowing down The pace of debt purchases provides some predictability.

Many investors had hoped that Powell would be nominated by President Donald Trump as chairman in 2017, and Biden would nominate him again for another four years. On Monday, Biden nominated Powell for a second four-year term. Fed board member Lyle Brainard is the other best candidate for the position as vice chairman.

Biden still has three Fed seats to fill, including the vice chairman responsible for supervision, and intends to elect these seats in early December.

Powell’s current term of office will expire in February 2022, which has proved beneficial to risky assets. Since his appointment on February 5, 2018, the Standard & Poor’s Index has risen 69.7%, and set a record with the help of some emergency measures. A series of new records The Federal Reserve has initiated actions in response to the coronavirus pandemic.

“My response was a relief,” said Peter Toots, president of Chase Investment Advisors in Charlottesville, Virginia. “He is a steady person and I think people generally like him since (COVID-19) became a problem for the first time.”

Although Tuz said Powell was “loved by both sides, but he has always been a fairly stable force.”

Powell has always been the most popular person, but after the sharp criticism of his performance by the Progressive Democrats and the trading scandal among Fed officials, his odds in the betting market fell, he was seen as less dunking.

As of Monday morning, the online gambling site PredictIt provides Powell with a 79% chance of being confirmed by the U.S. Senate, down from 90% on September 12, and the possibility of Fed Governor Lael Brainard being nominated It has increased to 23%, which was a low of 6% in September.

Although the Fed’s leadership has always been important to the market, Biden’s decision has become even more important this year as the Fed begins to reduce its monthly bond purchases of $120 billion.

At the same time, as the global supply chain is still being disrupted by the coronavirus pandemic, the Fed is facing a historic surge in inflation. The Federal Reserve announced its asset purchase plan in early November as it began to slow down the pace of purchases.

Robert Pavlik, senior portfolio manager at Dakota Wealth Management, said: “The market will see this as a sign of relief.”

Pavlik said that Brainard’s appointment as vice chairman “at least put some pressure on Powell to not raise interest rates too quickly.”

Brainard was nominated as a member of the Federal Reserve Board by former President Barack Obama in 2014. It is widely believed that she is more dovish than Powell, partly because she promotes to maintain a super loose monetary policy until more progress is made in employment recovery.

Prior to the announcement, the market had digested some of the risks of Brainard’s elevation. Powell’s news caused the fixed income market to digest “Federal Reserve tightening policy,” while bank stocks rose. “Brainard is considered to be more moderate on monetary policy.” .Policy,” wrote an analyst at TD Securities.

U.S. government bond yields, which are inversely proportional to prices, rose on the news, and the two-year and five-year U.S. Treasury yields hit their highest levels since the beginning of 2020. The dollar expanded its gains against a basket of currencies, but then the day of gains ended.

Fed funds rate futures, which track short-term interest rate expectations, have fully digested the 25 basis point tightening in June next year, and before Biden announced the news, this ratio had exceeded 90%.

NatWest analysts said that although the difference between Powell and Brainard will be “essentially zero” in a high inflation environment, they said, “People might argue that under Powell’s leadership, the reduction in December “Acceleration” is more likely.

(Reporting by David Randall; additional reporting by Stephen Culp and Shreyashi Sanyal; additional reporting by Gertrude Chavez-Dreyfuss; writing by Megan Davies; editing by Nick Zieminski)

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