Fed: Powell to stick to current policy strategy near term – Danske Bank

In terms of the dots, it is of course important to stress that uncertainty about monetary policy next year is higher than usual as the Fed will undergo big changes in terms of voting FOMC members, suggests the research team at Danske Bank.

Key Quotes

“In our view, Fed Chair nominee Powell’s approval in the Senate will be ‘plain sailing’ but there are still four empty seats in the Board of Governors (Trump has nominated one more, Marvin Goodfriend, just recently). Also, voting rights among regional Fed presidents will change in the New Year.”

“Powell will most likely stick to the Fed’s existing tightening strategy by continuing the gradual hiking cycle. Therefore, short term, the chances are that the Fed will be governed much like under Yellen. What will be more interesting will be how Powell will react should the economy or financial markets be hit by a shock in either direction. Powell is less qualified than Yellen (in terms of academic credentials) and the Fed will be less experienced (Yellen, Tarullo and Fischer had a lot of experience.”