We Are Right In The Middle Of The Fed Chair Nomination Season

October 13, 2021   |  
We Are Right In The Middle Of The Fed Chair Nomination Season

By Nicholas Colas of DataTrek Research

The last 3 times the Federal Reserve got a new Chair, we knew as early as October 9th (Yellen) or as late as November 2nd (Powell). We are, in other words, right in the middle of

We continue to stare in admittedly morbid fascination at the PredictIt odds for the next Federal Reserve Chair. That is the small-money wagering website we use as a proxy for the probabilities of important events where there is no capital markets equivalent. Two points on the latest data:

First: current Chair Powell is still the favorite, at 76 percent odds. Governor Brainard is a distant second at 18 percent. Former Fed Vice Chair Ferguson and current regional president Bostic have the same 6 percent odds of getting the nod. No one else shows odds of +5 percent.

Second: as the PredictIt probabilities chart below shows, Powell’s renomination odds have been all over the map in the last 90 days.

  • On August 10th the Wall Street Journal published an article which said that while White House officials generally supported Powell, “some Democrats want a central banker more in sync with the party priorities on regulation, climate, and the economy.”
  • That took Powell’s PredictIt odds down to 70 percent but just a month later they were at 90 percent, even higher than his previous high-water mark of 86 percent in late July.

Then the trading controversies around regional presidents Kaplan and Rosengren and later Vice Chair Clarida took Powell’s odds to fresh lows (61 – 63 pct). They have only somewhat recovered since. nomination season. Chair Powell remains the odds-on favorite, but it is by no means a lock.

If history is any guide, we should know the outcome in the next few weeks. Here are the dates when the last 3 Fed Chairs were announced and the Presidents in office at the time:

  • Ben Bernanke: October 25th, 2005 (Bush). Renominated on August 25th, 2009 (Obama)
  • Janet Yellen: October 9th, 2013 (Obama)
  • Jay Powell: November 2nd, 2017 (Trump)

Takeaway: while Powell remains the odds-on favorite, his renomination is by no means a lock and an announcement is likely coming very soon. For what it’s worth, we think Powell will keep his job. It makes little sense to switch the proverbial horses midstream, especially if the Democratic party’s progressive wing would be happy enough with Governor Brainard taking on the Vice Chair for Supervision role.

Tyler Durden Wed, 10/13/2021 - 11:30