US President Trump to interview Fed’s Waller for top Fed job – WSJ
The US President Donald Trump is set to interview Fed Governor Christopher Waller on Wednesday, for the top Fed job, according to people familiar to that matter, revealed the Wall Street Journal.
Waller add his name to National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh, which had been already interviewed by Trump.
In July, Waller dissented in favor of a rate cut, citing the deterioration of the labor market.
A WSJ poll in October revealed that Waller was ranked as the top choice of economists, because “he has laid out some of the most intellectually consistent arguments for rate cuts this year and is seen as someone who might be able to navigate internal divisions.”
“Several of his arguments for cutting rates have been adopted by Fed Chair Jerome Powell, who has faced unusually broad internal opposition from other officials more concerned about inflation risks,” the article mentions.
Despite this, Waller’s chances are slim as he lacks the personal relationship with Trump, despite being nominated by him to the Federal Reserve in 2020.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
