Fed chair race heats up but reaction muted so far
The race to be named the next chair of the Federal Reserve is hotting up, and Christopher Waller’s name appears to be at the top of the list, at least according to yesterday’s report from Bloomberg News.
As we mentioned earlier in the week, Waller is seen as the most dovish of the three main candidates in the running, as he was one of the only two FOMC members to vote for an immediate cut at the Fed’s July meeting - the first time that two governors had dissented at the same meeting since 1993.
Polymarket now gives Waller north of a 40% chance of being nominated, which should be bearish for the dollar, given that his appointment would likely mean a more accommodative Fed policy in 2026.
The reaction to the news has been limited, however, perhaps given expectations that Powell is unlikely to leave his role before the end of his term in May 2026, by which time most of the heavy lifted on the Fed’s easing cycle will already have been done.
This policy shift is now almost certain to be kicked off at the September meeting.
Communications from FOMC officials this week have been dovish, and it seems as though the July payrolls report has instigated a sea change in the bank’s guidance, which we think is likely to manifest into a more official pivot at the Jackson Hole conference in a couple of weeks time.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
