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State of the Fed 2018

A look at the State of the Federal Reserve in 2018. As always, I can be reached for comments, feedback, or questions on twitter or via my website www.thebanksterpodcast.com.

Introduction

I am Alexander Bagehot and you’re listening to The Bankster Podcast, the only podcast dedicated to the fascinating and ever more consequential world of central banking.

A notable part of every January here in the United State is the President’s address to congress called the State of the Union. It’s a speech that fulfills a requirement in the US Constitution, Article II, Section 3 to be exact. It says, “[The President] shall from time to time give to the Congress information of the State of the Union”. It’s a good way for an agenda to be outlined and aspirations for the year to be shared.

In honor of that tradition today I’m going to give a few basics that might be included in a State of the Federal Reserve 2018. My State of the Union will be less aspirational/what I think the Fed should be doing. It’ll be more foundational, more what is the State of the Fed, literally. But it will be fun to share a few of my thoughts regarding the current shape of the Federal Reserve and what to expect this year. So with that let’s jump right in.

Outline

  1. Vacancies and nominations

    • Chair: Jerome Powell (nominated, 2022)

      1. Will he continue Yellen’s policies as is predicted?

      2. Will he be open to loosening regulations?

      3. Will he maintain relatively positive relationship with congress/president?

    • Vice Chair: Vacant

    • Vice Chair Supervision: Randal Quarles ( Jan 2018, renominated)

    • Gov: Lael Brainard (2026)

    • Gov: Marvin Goodfriend (nominated)

    • Gov: Vacant

    • Gov: Vacant

    • 8 collective years of experience on BOG, Trump will nominate 6 of 7

    • NY Fed President: Bill Dudley leaving (search underway expected 2018)

    • Richmond: Thomas Barkin (started Jan 2018 to replace Lacker who resigned)

    • Atlanta: Raphael Bostic (started June 2017)

  2. FOMC rotation

    • Cleveland (Chicago)

    • Richmond (Boston, Philadelphia) - Barkin first time voter

    • Atlanta (St Louis, Dallas) - Bostic first time voter

    • San Francisco (Kansas City, Minneapolis)

    • (9 of the 12 voting members might be new by the end of the year)

  3. Interest rate increases

    • December Dot Plot has a median estimate of 3 increases (6 for the median, 6 below, 4 above)

    • As of today, futures markets (people betting on what the rate will be) have about ⅓ chances there will be 2 increases, ⅓ chances there will be 3 increases and the remaining third divided evenly above and below

    • December minutes show tax might make them want to raise sooner

    • Inflation still coming in under the 2% target - and you have a number of officials warning caution on raising rates too fast without reason

  4. Yellen steps down

  • Academia

  • Corporate Boards

  • Nonprofit Boards

  • Think Tanks

  • Public sector, IMF, World Bank, Government position

  • Genuinely retire (age 71, Econ Nobel Laureate husband, PhD Econ Son who’s teaching at University of Warwick in UK)

  • Write book

 

Conclusion

In conclusion - 2018 will be an exciting year in the Centralverse. The Board of Governors will be full of Trump nominees. The NY president will be new as well as a few other bank presidents, including two new voting members of the FOMC from Atlanta and Richmond. Barring some kind of surprise, unforeseen economic downturn, the Fed (and most developed economies Central Banks) will raise interest rates (by how much only time will tell), and finally we will see the end of the historic Chairwomanship of Janet Yellen. Let me know your thoughts about the coming year. I’m especially looking for more great books on Central Banking past and present. Send in your ideas!

As always, I can be reached for comments, feedback, or questions on twitter or via my website www.thebanksterpodcast.com.

Today’s episode was written, edited, and produced by me, Alexander Bagehot. Thanks to all of you for listening, and I’ll see you next time on The Bankster Podcast!

 

 

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