FED: The Sweepstakes To Succeed Powell: Warsh Et Al.
Nov-24 18:29
- Ex-Fed Gov Kevin Warsh (18%): Close to Waller in the running is ex-Fed Gov Warsh, who was reportedly a finalist to succeed Janet Yellen as Chair in 2018 but was passed over by Trump in favor of Powell (a decision that Trump suggested in 2020 he had second thoughts about in retrospect). He is both an insider (Fed governor, 2006-2011) and an outspoken critic of the institution, arguing from his position as a fellow at Stanford's Hoover Institution that the Fed should reform everything from its communications policy to the role of regional Fed banks to its macroeconomic forecasting models. As such he'd probably be the most "radical" choice in terms of changing the structure of the institution. He said this year “I think what we need is regime change at the Fed, and that’s not just about the Chairman, it’s about a range of people...it’s about breaking some heads, because the way they’ve been doing business is not working.”
- He unconventionally has said that the Fed should reduce the size of its balance sheet in order to bring down interest rates, contrary to the conventional wisdom of the impact of QE vs QT.
- A possible argument against Warsh's candidacy from the White House's perspective is that he was a monetary policy hawk during his time as Governor, and indeed critiqued the Fed's decision to ease last year amid elevated inflation.
- Market reaction if Warsh is appointed: More difficult to predict than most, but his outspoken stance on lower rates would probably suggest a market reaction similar to Hassett: steeper yield curve and weaker dollar.
- Outside of the perceived Top 3 are:
- Blackrock's Rick Rieder (10%): The only finalist not to have a background in public service, Rieder - who runs Blackrock's fixed income business - is probably the biggest wild-card and least "conventional" candidate to succeed Powell. He has burnished his dovish credentials, calling for a 50bp cut in September, with his analyst note following the October cut saying "we think the Fed is right in lowering interest rates again". And Bloomberg cited sources in reporting that Bessent "was impressed with Rieder’s long career in markets running large groups and his deep understanding of micro- and macro-contributors to the economy".
- Fed Vice Chair for Supervision Michelle Bowman (2%): First named to the Fed Board in the 1st Trump administration in 2018, Bowman has been one of the FOMC's main and earliest advocates for rate cuts this year, perhaps helping elevate her profile for the White House's consideration. Indeed the Trump administration named her Vice Chair for Supervision in June, and she has advocated for a broad-based holistic review of the US capital framework in line with the White House's broader deregulatory drive. That said, her job in that financial regulatory role isn't quite done yet, which is perhaps one reason there is a perception that the White House may want to keep her where she is and appoint somebody else as Chair.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
FED: MNI Fed Preview - October 2025: QT, Or Not QT
Oct-24 21:06
MNI's preview of the October FOMC has been published - Download Full Report Here
- The Federal Reserve is overwhelmingly expected to cut the funds rate by 25bp for a 2nd consecutive meeting on October 29, bringing the target range to 3.75-4.00%.
- This will again be framed as a risk management cut, with the limited data available since the September meeting not disconfirming that the shift in the balance of risks had tilted toward labor market downside.
- Dissent to this decision should once again be limited to Gov Miran in favor of a 50bp cut.
- With limited new developments and official data to opine on, Chair Powell’s press conference will be eyed for affirmation that a December cut remains on track, as signalled by the most recent Dot Plot.
- He’s unlikely to give much away, but it would be surprise given the lack of data and relevant developments if he suggested that a further 2025 cut was in any greater doubt than it was 6 weeks earlier.
- Instead, we think focus in terms of action at this meeting will be on the balance sheet, with the Fed likely to announce an end to quantitative tightening amid diminishing reserve levels and nascent evidence of funding market pressures.
- We will also be watching for any news on the Fed’s communications framework, with an updated “Dot Plot” potentially unveiled at some point by year-end.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Oct 27
RATINGS: Moody's Lowers France's Outlook To Negative, Maintains Aa3 Rating
Oct-24 20:55
Moody's has lowered its outlook on France to negative from stable.
- Moody's was expected to at least lower the outlook, so this is not a surprise - there had been some risks perceived of a downgrade to A1 (from Aa3) in the domestic and foreign currency long-term issuer and domestic-currency senior unsecured ratings.
- Per the Moody's release: "The decision to change the outlook to negative reflects the increased risk that the fragmentation of the country's political landscape will continue to impair the functioning of France's legislative institutions. This political instability risks hampering the government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and durable increase in borrowing costs, thus leading to a more rapid weakening in France's key fiscal metrics than we currently expect."
- Both S&P and Fitch have already downgraded France’s sovereign rating to the single-A bucket this year.
USDCAD TECHS: Corrective Pullback
Oct-24 20:00
- RES 4: 1.4200 Round number resistance
- RES 3: 1.4167 50.0% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.4111 High Apr 10
- RES 1: 1.4080 High Oct 16 and the bull trigger
- PRICE: 1.4016 @ 16:33 BST Oct 24
- SUP 1: 1.3979/3907 20- and 50-day EMA values
- SUP 2: 1.3829 Bull channel base drawn from the Jul 23 low
- SUP 3: 1.3769 Low Sep 19
- SUP 4: 1.3727 Low Aug 29 and a bear trigger
USDCAD has pulled back from its recent highs. The trend condition is bullish and a move lower is considered corrective. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4111, the Apr 10 high, and further out, scope is seen for an extension towards 1.4167, a Fibonacci retracement. First key support lies at 1.3907, the 50-day EMA. Support at the 20-day EMA lies at 1.3979.
