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President Barack Obama is now a lame duck. There’s speculation, well founded, that the days are numbered for Federal Reserve Board Chair Janet Yellen, too.
Trump has said he wants Yellen gone
The first woman to head the nation’s central bank, appointed by Obama and confirmed by the Senate, drew criticism from President-elect Donald Trump during the campaign. Candidate Trump indicated that he’d likely nominate someone else to be Fed chair.
“Yellen’s term as chair expires at the end of January 2018. She is highly unlikely to be reappointed by Trump,” says Stu Hoffman, chief economist at PNC Financial Services Group.
Trump also charged that interest rates were being held artificially low for political reasons and suggested that if Hillary Clinton were elected president, rates would rise sharply thereafter.
Yellen herself publicly refused to wade into the political fray. At her September news conference, she told reporters, “We do not discuss politics at our meetings, and we do not take politics into account in our decisions.”
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What about rates?
Along with the question of Yellen’s continued involvement at the Fed, there’s also the matter of next month’s meeting of the central bank’s policy-making Federal Open Market Committee. Financial markets initially reacted to Trump’s election victory by placing lower odds on a December interest rate hike.
“Odds of December rate hike are a close call, dependent in part on the markets and economic data between now and the FOMC meeting. (A) continued steeper yield curve and stock market decline would postpone an FOMC hike next month,” says Hoffman. The Fed last raised rates in December of last year.
There’s another thing the Fed needs to see in the coming weeks, namely the November jobs report. If hiring remains at a steady pace and no other caution lights are blinking, then the notion of a pre-Christmas rate hike could remain in play.
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