Wall Street Eyes Four More Year’s for Fed’s Powell

Jerome Powell, the Federal Reserve Chairman, remains favored for getting re-nominated by the White House. If history is to repeat, then the decision may be made at any time before the meeting of the central bank early in November. President Donald Trump had nominated Powell for the role of the Fed’s Chairman back in 2017 and he was confirmed by the Senate. Wall Street expects him to be re-nominated for another four-year stint by President Joe Biden. Analysts said that the market would like him to continue because he is now a known quantity, so they have become comfortable with him.

Predictit, the political betting website showed an 84% chance of the Senate’s reconfirmation of Powell, which is down from September 12th when it was 90%. However, it is roughly even with what it had been back in July. Lael Brainard, the Fed Governor, appears to have a 15% chance of being selected. In February 2018, Fed had been selected as chair of the Board of Governors of the Federal Reserve as a replacement of Janet Yellen. He has had the responsibility of maneuvering the economy through the worst crisis it has seen since World War Two, as the COVID-19 pandemic wreaked havoc from the beginning of last year.

During Powell’s tenure, the US stock market has rallied, thanks to the extraordinary measures of the US central bank for shielding the economy from the COVID-19 pandemic. The S&P 500 saw an increase of 60% under Powell, which is in accordance with the index’s gain during the four years Yellen was in charge of the Fed, when Wall Street had recovered from the financial crisis of 2008 into a bull market that was almost a decade long. The eight-year term of Ben Bernanke came to an end in January 2014 and there was a 39% increase in the S&P 500 during this time. 

There is an active discussion ongoing about the selection of the Fed’s chair by the Biden administration. The last two appointments of the Fed chair have been made between the time of the previous Fed meeting and the upcoming one in November. The decision by the new administration would come at a critical point for the central bank. The US stock market is trading at record highs, due to which investors are expecting the Fed to begin cutting back on their bond-buying program from November, keeping the guidance from Powell in mind after Wednesday’s meeting of the Fed. 

A number of investors were surprised at the hawkish approach of the central bank regarding future interest hikes, as nine of the 18 Fed policymakers projected that borrowing costs would increase in 2022. Some progressive democrats want the central bank to have a more expansive role by strengthening efforts to boost employment, addressing inequality and heading off climate risk. Others want them to stick to their monetary policy lane, focus on fighting inflation and also cut back its footprint in financial markets and where oversight is concerned. The Biden administration has praised Powell’s focus on jobs. 

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