the choice of Jerome Powell by the US president, Joe Biden, to continue as Federal Reserve Chair it gives global investors stability and some predictability as the central bank prepares to scale back its asset purchases and start raising interest rates.
Many investors had hoped that Powell, appointed Fed leader by former President Donald Trump in 2017, would be reappointed by Biden for another four-year term.
in this Monday (22) Biden has appointed Powell for a second four-year term, with Lael Brainard, a member of the Federal Reserve board and the other top candidate for the job, as vice-chair.
Biden he has three more Fed seats to fill, including vice president of oversight, and plans to do so in early December.
Powell’s current term, ending in February 2022, has been positive for risky assets, with the S&P up 69.7% since his appointment on February 5, 2018 and partly hitting a series of new highs. for emergency measures launched by the Fed in response to the coronavirus pandemic.
“My reaction is one of relief,” said Peter Tuz, president of Chase Investment Counsel. “He was the firm bet, I think people generally liked the policies he’s adopted since (Covid-19) became an issue.”
US government bond yields, which move inversely to prices, rose on the news. Rates for two- and five-year bonds have been at peaks since early 2020.
The dollar extended gains against a basket of currencies, and the S&P 500 hit another record high.
Powell has always been the favourite, but his choice has come to seem less obvious after harsh criticism of his performance by progressive Democrats and a scandal among Federal Reserve officials over financial market operations.
Online betting site PredictIt showed this Monday morning a 79% chance of Powell being confirmed by the US Senate, up from 90% on September 12, while director Lael Brainard’s probability of having her name approved rose to 23% , from a low of 6% in September.
Although the central bank leadership of USA always important to markets, Biden’s decision takes on greater importance this year as the Federal Reserve begins to reduce its $120 billion in monthly bond purchases.
At the same time, the Fed is facing a historic spurt of inflation as global supply chains remain disrupted by the coronavirus pandemic.
“Markets will take this as a sign of relief,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.
Pavlik said Brainard taking on the vice-chair role “at least puts some kind of pressure on Powell not to act too quickly with the interest rate hike.”
Brainard, appointed to the Fed’s board by former President Barack Obama in 2014, is widely seen as more “dovish” (inclined towards a looser monetary policy) than Powell, in part because of his effort to maintain a monetary policy. overstimulating until more progress is made in job recovery.
Reference: CNN Brasil
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