Centrists are set to take the center stage in Fed

• John C. Williams of San Francisco Federal Reserve nominated as a successor of William Dudley as New York Federal Reserve President and permanent FOMC member.
• The academist economist and the PIMCO advisor Richard Clarida set to win the nomination for Federal Reserve vice-chairman seat in Congress on May 15.
• The two nominations are likely to confirm the centrist path of the policymaking authority with the gradual path of monetary policy normalization.

While the appointment of the current chairman of the US Federal Reserve might have been a bit of a surprise for markets betting on more ideologically connected people with the US President Trump, the nomination of John Williams for the New York Federal Reserve Bank President and Richard Clarida for the post of Federal Reserve vice-chairman looks like it is some kind of plan.

The top Federal Reserve positions, the chairman of New York Federal Reserve Bank, the only permanent seat in the national board of the US Federal Reserve Bank and the vice-chairman of the Federal Reserve Bank in Washington DC are at stake with centrists set to take the nomination.

Both, the economist Richard Clarida nominated as vice chairman of the Federal Reserve and the appointment of John Williams to the influential post of president of the New York Federal Reserve confirm the outlook for centrist Fed with Clarida's nomination hearing in committee scheduled for May 15.

Centrists policymakers are likely to ensure the continuity of the gradual approach to reducing recent monetary stimulus.

With a strong academic background from Columbia University and financial markets background shaped as an advisor to the world’s largest bond fund (PIMCO), Richard Clarida appears to advocate low neutral rate and the Fed's inflation-targeting framework.

As managing director and global strategic adviser at Pacific Investment Management Co. and an economics professor at Columbia University, he would balance Chair Jay Powell's banking and finance background.

Clarida’s centrist view was expressed recently with the economist noting in December last year that "the market should probably pay more attention to the fact that perhaps Goldilocks is a little too relaxed about inflation."

With the latest round of inflation data confirming that inflation has breached 2%, the key question is how will policymakers handle inflation above 2%. Officials now expect core inflation to reach 2.1% by the end of 2019 as the economy moved further above its potential and resource utilization continued to tighten while in speeches on many official the call for the Federal Reserve accepting inflation overshoot of 2% target for longer is more accentuated.

That means that the policymakers are now willing to accept the inflation overshoot for longer now after the prolonged period of sluggish price pressures are unlikely to overreact.