Four More Years.
Biden nominates Jay Powell for a second term.
· Jay Powell to serve a second term as chair of the Federal Reserve.
· Lael Brainard, considered the competitor to the throne, assumes the role of vice-chair and is expected to be named vice-chair of supervision (oversees the US banking system).
· This decision provides continuity as the Fed grapples with inflation and the labour market recovery.
· Overall, the appointment is unlikely to result in a significant market reaction.
· Thus far, treasury yields are a few bps higher. With Powell free to focus on inflation and employment without worrying about his job security, the risk is he becomes a little more hawkish.
· Powell has been clear that employment matters more than inflation, so the path forward for interest rates will continue to be dictated by jobs.