Powell's Chances of Fed Chair Reappointment Rise... Reduced Uncertainty Boosts Stock Market

Yellen Treasury Secretary Conveys "Support for Paul" to the White House

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed)
[Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] The likelihood of Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), being reappointed as his term expires in February next year appears to be increasing. Powell's reappointment is expected to be positive for the stock market as it could reduce uncertainty regarding Fed monetary policy.

According to major foreign media on the 22nd (local time), U.S. Treasury Secretary Janet Yellen recently conveyed her support for Powell's reappointment to the White House. Given that Secretary Yellen is a sitting Treasury Secretary with strong influence over the Biden administration's economic policy and was Powell's predecessor, Powell has gained a powerful ally.

If Powell is reappointed, the current monetary policy stance pursued by the Fed is unlikely to change significantly. This implies continuity in Fed monetary policy, which would reduce uncertainty and be favorable for the stock market.

In U.S. political circles, as economic uncertainty has risen again due to the spread of the COVID-19 Delta variant, there is growing support for a more cautious approach to replacing the Fed Chair. Voices advocating for maintaining policy continuity to reduce uncertainty have increased.

Concerns about an early interest rate hike in the U.S. may also diminish. Recently, with inflation rising sharply, there have been increasing calls in the U.S. for the Fed to tighten monetary policy. However, Powell has maintained the position that "inflation is temporary" and that it is necessary to continue an accommodative monetary policy stance. Powell holds the view that even if the scale of quantitative easing is reduced, an interest rate hike would only be possible in 2023 or later.

President Joe Biden recently stated that his White House economic team agrees with Powell's view that the U.S. inflation rise is temporary.

There is also a forecast that reappointing Powell would help the Biden administration implement large-scale fiscal spending policies in the future. The Republican Party opposes Biden's large-scale fiscal spending plans, arguing that they cause inflation. If Powell, who was appointed by a Republican administration, is reappointed, it could somewhat ease the Republican Party's dissatisfaction and concerns.

President Biden is reportedly yet to make a decision on Powell's reappointment. However, it is expected that a decision will be made around Labor Day on the 6th of next month.

Secretary Yellen is known as someone who understands Powell better than anyone else in the current Biden administration because she worked at the Fed for nearly 20 years. Yellen worked closely with Powell on the Fed Board of Governors for six years from 2012, when Powell became a Fed Governor, until 2018.

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