With Dudley resigning chances of Trump’s Fed rise

The New York Federal Reserve President William Dudley retiring, the changes of personnel at the US monetary policy most prominent Board are mounting up, raising questions about what the future of monetary policy will be.

It is very likely that the US President Trump will try to shape the composition of Fed towards deregulation nominating more market-friendly candidates. At least this seems to be the case with nominations of Randal Quarles replacing Fed Governor Daniel Tarullo and Jerome Powell replacing Fed’s chair Janet Yellen. 

The open posts include Fed vice-chairman Stanley Fisher’s position who retired earlier in September. Furthermore, there are changes at the regional level with the New York Federal Reserve President William Dudley retiring in mid-2018.

Tarullo vs Quarles
Fed Governor Daniel Tarullo who said he will resign earlier this year has been already replaced by Randal Quarles taking office as a member of the Board of Governors of the Federal Reserve System on October 13, 2017. Tarullo’s term of Fed Governor was set to expire on January 31, 2018. 

Quarles was sworn in as Vice Chairman for Supervision with his position as a Vice Chairman for Supervision ending on October 13, 2021.

Quarles is a former investment banker and investor. Before joining Fed, he founded and managed Utah-based investment firm Cynosure Group and before that he was a partner at The Carlyle Group, a private equity firm based in Washington DC. With Quarles at the top position responsible for banking supervision, it is clear that this is Trump’s signature cry for less regulation.

Yellen’s case
Ever since running in the presidential campaign, Trump had made it clear that he opposes Janet Yellen’s policy in Fed. We already know that current Fed governor Jerome Powell was nominated by Trump to replace Yellen, whose term is expiring in February next year. With Jerome Powell in charge in Fed, the grip over the Wall Street with banking regulation is expected to loosen, unlike under Yellen.

Fisher’s replacements
A position of Stanley Fisher, Federal Reserve’s vice chairman who resigned in September is also open for Trump’s nomination.

Stanley Fischer resigned just three years from his appointment to the Fed’s board in May 2014. Before that Fisher served for years as the governor of the Bank of Israel with a long and distinguished career as an academic economist and International Monetary Fund’s chief economist.

Although his monetary policy views were more hawkish than that of Yellen, he always provided reliable support for measures strengthening financial regulation. In recent months he has joined Ms. Yellen in warning against weakening regulations that have been enacted since 2008.

Regional changes

With William Dudley resigning, the New York Federal Reserve top position will be sought. Dudley’s term would have expired in January of 2019 when reaching 10-year policy-limit in the role.

The New York Federal Reserve has a special position in the setup of policy-setting Federal Open Market Committee because it is assigned a permanent voting right while voting rights for other regional Fed presidents are prescribed by rotation basis.