It was announced this morning that President Biden will renominate Jerome Powell as the Federal Reserve (Fed) chair. He will also elevate Fed Governor, Lael Brainard, to vice chair of the Fed. According to a Bloomberg report on November 22, the position of vice chair of supervision (of banks) was left open. A selection is anticipated early next month. As we pointed out recently in our weekly commentary, this is significant because Brainard would be expected to take a “tougher” stance on bank regulation. Senator Warren had criticized Powell on his relatively more “relaxed” regulatory approach to banks. The continuation of Powell as Fed chair was our base case scenario and assures a continuation of Fed policy. Although Powell is a Republican, he was backed by an 84-13 majority for his first term as Fed chair. We expect Powell to be easily confirmed with a bipartisan vote. Brainard is the only registered Democrat on the Board of Governors and was appointed for that role by President Obama in 2014.
As we have previously indicated, we expect a Powell led Fed to accelerate the Fed’s recently announced tapering program so that it could be in a position to raise interest rates in a more timely fashion if economic conditions are appropriate.
Early Market Reactions
Two-year Treasury yield trades higher to one-month highs, 10-year Treasury yield higher as well, U.S. equities higher, USD continues higher, U.S. banks trade higher.
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