Shopee The race for Federal Reserve chairman accelerates

If the news that Trump is considering a candidate for Federal Reserve Chair is true, it will significantly alter the direction of US monetary policy and have far-reaching implications for global financial markets. The following are key analysis points:

I. Analysis of Candidate Backgrounds and Policy Inclinations

1. Kevin Warsh

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Hawk Label: He competed for the Fed Chair position in 2017. His monetary policy stance is more hawkish than Powell's, advocating for faster balance sheet reduction.

Unusual Background: A former Morgan Stanley executive whose father-in-law is the heiress of Estée Lauder. He has close ties to Wall Street but advocates limiting financial bubbles.

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Potential Shift: In 2023, he wrote an article suggesting that "the neutral interest rate may have structurally risen," potentially supporting a higher and longer-term interest rate policy.

2. Speculations about the Other Three Undisclosed Candidates

Political Loyalty Priority: This could include economists who served in the Trump administration (such as Judy Shelton

Non-traditional candidates: Considering former corporate CEOs is possible, similar to Volcker's "external deterrence" approach.

Geographical balance: Midwestern representatives may be included, echoing the manufacturing appeal in key states.

II. The deeper impact of Kugler's resignation

Creating a power vacuum: The departure of the first Latina female board member (who will take office in October 2023) reduces the number of Democratic members on the board to three.

Early window for planning: If Trump wins, he will have the opportunity to replace five of the seven board members by 2026, far exceeding the three replacements during the Obama administration.

Policy transmission mechanism: The current centrist coalition of "Powell, Jefferson, and Kugler" may collapse, and the FOMC voting power will be restructured in 2025.

III. Market and policy chain reactions

1. Restructuring the interest rate path

Warsh's appointment may promote:

An early end to balance sheet reduction (his 2015 paper advocated for proactive balance sheet reduction);

Revising the 2% inflation target to a dynamic range system;

Strengthening the coordination between interest rate decisions and fiscal policy (echoing Trump's preference for bond yield control);

2. The Game of Dollar Hegemony

A politicized Federal Reserve will weaken the dollar's credibility:

Central banks may see accelerated growth in gold reserves (already increased by 1,136 tons in 2023)

Increasing pressure to adjust the Special Drawing Rights (SDR) currency basket

3. Risk of an October Surprise in an Election Year

If clear personnel signals are released in September or October, this could trigger:

The US Treasury Volatility Index (MOVE) breaks through 150 (currently 125)

A restructuring of tech stock valuations (persistent high interest rates suppress PE ratios)

IV. Historical Comparisons and Institutional Impacts

The most politicized moment since the 1978 Full Employment Act: This will break the nearly 30-year tacit agreement that the president will not publicly intervene in the Federal Reserve.

Risk of redefining the dual mandate: Employment targets may be weakened through executive orders and other means, while industrial competitiveness considerations may be emphasized.

Technology officials Bureaucratic collapse: May lead to the departure of over 200 Fed economists, impacting the reliability of monetary policy models.

Currently, pay close attention to:

The direction of Warsh's recent columns in the Wall Street Journal and other media outlets

The pace of the Senate Banking Committee's review of remaining Board nominees

Unusual fluctuations in inflation expectations implied by 10-year TIPS

This personnel reshuffle not only affects interest rate policy but also marks a critical turning point in the U.S. economic governance system's shift from a rules-based to a politically-driven one. Its impact could far exceed the market volatility that occurred when Powell took office in 2018.