The Next Federal Reserve Chairman

Posted: September 20, 2013 in Uncategorized

Well, now that Summers is out – it looks like Yellen is the candidate number one.

Yellen, 67 born in Brooklyn New York, is an academic (Harvard, London School of Economics) that had several position within the FED and as an economic adviser under Clinton.

She would be well accepted by the market due to her dovish position towards quantitative easing and her attitude of looking through the numbers of unemployment (she does not look just at the unemployment, but also at the employment participation rates).

There are few questions, looking at her history, that could rise a few doubts in regards to her dovishness as she, in various positions she was presiding in the past, she looked very committed to an inflation target of 2%, not a cent lower or higher.

And for sure inflation is starting to appear through the numbers.

But still it is not a done deal. It was her supporters that killed the candidacy of Larry Summers, President Obama’s man. So President Obama backers will not be happy with her.

Plus the Republicans see her too dovish for the job, but they should not have too much of a say (Chair election, apart the President, it is on the US Senate who has a Democratic slim majority (52 DEMOCRATIC vs 46 REPUBLICAN – 2 INDEPENDENT (but elected in the DEMOCRATIC Caucus)).

So there is still quite a chance of a Dark Horse (unexpected Chairman) getting elected. The time frame of the announcement, statistically, should be October – probably late as there are few thorny issues around that time (US Debt Ceiling). The market, on average, displays increased volatility around this period.

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