Is Janet Coming Back?

George Yacik - INO.com Contributor - Fed & Interest Rates


A lot of names have been thrown around to be the next head of the Federal Reserve. But who is the most likely person President Trump will name?

The current occupant, Janet Yellen, has to be considered the front-runner, although that doesn’t necessarily mean she’ll be renominated. Indeed, I would put the odds of her being reappointed at less than 50-50 – a lot less.

She does have several things going for her. First and foremost, she’s a known quantity. The markets would certainly be happy if Yellen were reappointed, if for no other reason than that they’ll know what they’re getting. With the major stock indexes all at or near all-time highs, and the bull market already nine years old, the market doesn’t want anything untoward to upset the status quo.

But as we should know well by now, stability isn’t exactly Trump’s comfort zone. Two weeks ago, he had no problem telling investors in billions of Puerto Rican bonds that they could pound sand, which caused a major meltdown in the price of those bonds (administration officials subsequently walked back his remarks).

Would he risk something like that happening to the entire bond and stock markets by not reappointing Yellen? (Even if she doesn’t get reappointed as Fed chair, Yellen’s term as a member of the Fed’s Board of Governors doesn’t end until January 2024, although it’s expected that she’ll resign if she’s not renamed as chair).

Besides the stability factor, the main reason why the markets like Yellen, of course, is because, in the words of Mr. Trump himself on the campaign trail in May 2016, “She is a low-interest rate person, she’s always been a low-interest rate person, and let’s be honest, I’m a low-interest rate person.” He reiterated those feelings in July in an interview with the Wall Street Journal, in which he added, “I think she’s done a good job.” Continue reading "Is Janet Coming Back?"

Fed Can't Backtrack On Regulatory Reforms

George Yacik - INO.com Contributor - Fed & Interest Rates


I’ve been pretty harsh in this column on Federal Reserve monetary policy, but the one area that I haven’t written much about– financial regulation – is probably the main area where the Fed does deserve a lot of credit.

In her speech at the Jackson Hole symposium late last week, Fed Chair Janet Yellen probably disappointed a lot of market watchers for her failure to talk about interest rates or unwinding the Fed’s balance sheet. Instead, she spent most of her speech defending the Fed’s actions in the regulatory realm in the wake of the global financial crisis and pushed back against critics who want to roll back those regulations, including President Trump, who vowed that he wants to “do a big number” on Dodd-Frank.

If Yellen wants to be reappointed to her position by Trump when it ends in February, she certainly didn’t sound like it. Then again, making comments in opposition to Trump is hardly a heroic stance.

Still, she deserves credit for defending the Fed’s position on bank regulation, and the next Fed chair, whether it’s Yellen, Gary Cohn, or someone else, should stick with the current policy, which will go a long way toward keeping our banking system safe and secure and make sure that the global financial crisis doesn’t repeat itself. After all, if you can’t trust keeping your money in a bank, nothing else matters. Continue reading "Fed Can't Backtrack On Regulatory Reforms"

Will There Be A November Surprise?

George Yacik - INO.com Contributor - Fed & Interest Rates


In its most recent Beige Book, covering late August through early October, released last week, the Federal Reserve noted that although economic “outlooks are positive, contacts in several sectors cite the upcoming presidential election as a source of near-term uncertainty, delaying some business decisions.”

The same could be said for the Fed itself. How much uncertainty has it created and business decisions has it delayed by its endless dawdling and indecisiveness on whether or not to raise interest rates? No matter who wins the vote, the election will end – maybe not on November 8, if it can be shown that someone did, in fact, rig the voting – but eventually, Donald Trump or Hillary Clinton will become president. But we have no such certitude that the Fed won’t continue to tease the markets about when it will start normalizing monetary policy. Continue reading "Will There Be A November Surprise?"

Is Data Dependency Dead At The Fed?

George Yacik - INO.com Contributor - Fed & Interest Rates


While it was certainly gratifying to know that the Federal Reserve may, finally, be ready to raise interest rates and normalize monetary policy before the end of the year, its reason for doing so, elucidated after last week’s FOMC meeting and Janet Yellen’s press conference left me shaking my head. To put it in economic terms, it didn’t make a whole lot of sense, given the Fed’s past behavior.

As we all know by now, the Fed, as widely expected, left interest rates unchanged last week, but hinted strongly for the umpteenth time that it’s almost ready to raise rates, just not right now.

“The committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives,” the post-meeting announcement said.

Yet, at the same time, the Fed lowered its estimate for U.S. economic growth this year to 1.8% from its June forecast of 2.0%, which is also its new long-term view of the economy. That’s certainly justified by the reports we’ve been getting the last several weeks, which show the economy slowing, not gaining strength, in the second half.

So why would the Fed say that the case for raising rates had “strengthened” even as it downgraded its view of the economy and most recent reports back that up? Continue reading "Is Data Dependency Dead At The Fed?"

Needed: More Transparency at the Fed

George Yacik - INO.com Contributor - Fed & Interest Rates


The Federal Reserve is starting to feel some heat from both the right and the left about how secret its activities deserve to be from American taxpayers. The fact that next year is a presidential election year and the heat is being brought by two candidates for the Oval Office may mean that the pressure may amount to something this time.

On January 28 Sen. Rand Paul, R-KY, reintroduced his "Audit the Fed" bill that would subject the Fed's monetary policy discussions and decisions to audits by the Government Accountability Office (GAO).

"This secretive government-run bureaucracy promotes policies that have impacted the lives of all Americans," Paul said. "Citizens have the right to know why the Fed's policies have resulted in a stagnant economy and record numbers of people dropping out of the workforce."

Previous versions of Paul's bill – originally sponsored by his father, former presidential hopeful Ron Paul, and others – have gotten nowhere, largely because Democrats controlled the Senate. Now, of course, that body is now controlled by the Republicans. Paul got 30 co-sponsors to his bill. Continue reading "Needed: More Transparency at the Fed"