On Friday January 30th, President Trump announced Kevin Warsh as his next pick for the Fed Chair. In the wake of this announcement, the financial markets took this appointment largely in stride. Treasury yields stayed relatively the same immediately following the announcement, demonstrating that investors saw little risk to inflation and the Federal Reserve's independence. The US dollar saw a gain against competition major currencies while stock losses were contained. Both Gold and Silver prices plunged due to the appointment being seen to help ease the concerns about US currency "debasement" Overall, these market events signal confidence from investors in the credibility of Warsh to steward monetary policy.
Warsh's nomination is seen as boosting the independence of the Fed, which had been previously been weighing on stocks and driving interest rates higher. Due to this risk decreasing, investors are able to focus on economic fundamentals rather than political interference, benefitting the market as a whole.
I feel like it is a good sign that the economy stayed relatively stable after announcing the new pick for the Fed Chair. I wonder if investors will keep this confidence after he gets officially put into office or if come May, when Powell steps down, the economy will be impacted. Overall, I think it won't be clear the effect Warsh will have on the economy until he puts some major economic policies in place.
ReplyDeleteI think this is going to be a good change. There have been positive comments and high hopes for the new chair however only time will tell what is going to happen.
ReplyDeleteThe market barely reacting seems like a good sign that investors aren’t overly worried about this pick and are staying focused on the bigger picture. Although, it’ll probably take some actual policy decisions from Warsh before we really see how much confidence the market keeps.
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