Biden Selects New “Top Economic Adviser”

It’s widely expected that U.S. President Joe Biden will name Federal Reserve Vice Chair Lael Brainard to the White House’s top economic policy position this week. 📝

She will replace White House National Economic Council (NEC) Director Brian Deese, who recently resigned. Additionally, Jared Bernstein will likely replace Cecilia Rouse as chair of the Council of Economic Advisers. And many expect the Labor Department’s chief economist, Joelle Gamble, to be made a deputy NEC director.

In her new position, Brainard will advise Biden on policy and personnel decisions and coordinate policy-making across executive branch agencies. Many speculate her long career in government could set her up to take Janet Yellen’s place as Treasury Secretary if Democrats win reelection in 2024. 🗳️

As a member of the Federal Open Market Committee (FOMC), Brainard recently presented her colleagues with a marginally less aggressive monetary policy case. Her concerns are that if the Fed overtightened in its fight against inflation, it could lead to economic difficulties on the back end of that policy decision. She’s also known for consistently opposing various measures to ease financial regulations between 2018 and 2020.

Despite the position being all but officially confirmed, the market’s response was muted. This could suggest people are not rushing to speculate on what this means for future economic policy. There are bigger fish to fry at the moment. 🤷

While we’re on the subject of government officials, there were two more announcements today. 📰

First is that the last remaining Republican FTC Commissioner, Christine Wilson, resigned from her post. She stated that Democratic Chair Lina Khan’s “disregard for the rule of law and due process.” was her primary reason. The vacancy means President Biden can nominate two commissioners, though neither can be a Democrat.

Secondly, California Democratic senator Dianne Feinstein says she will retire at the end of her current term. That opens the door for representatives Adam Schiff and Katie Porter, California Democrats, to fight for her seat. At 89, Feinstein is the oldest sitting U.S. senator and longest-serving California senator. ⚔️

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Soundbites From Several Fed Speakers

The Federal Reserve’s Chairman Jerome Powell delivered his testimony to Congress today, providing an outlook for the economy and banking system. Several other central bank members also spoke, creating a lot of headlines. 

Let’s look at some key soundbites so you don’t have to watch the full three-hour video. 👇

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Japan’s Big Policy Shift

After a decade-long period of monetary easing, the Bank of Japan is finally making some adjustments. The central bank surprised markets by allowing the 10-year Japanese government bond yield to rise to a nearly nine-year high. 📈

Governor Kazuo Ueda said this doesn’t mean the bank is giving up his predecessor, Haruhiko Kuroda’s, easy policy that included negative short-term rates and capping the bond yield through large government bond purchases. However, it does mean it’s giving the market more freedom to affect yields.

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“Ongoing Rate Increases Will Be Appropriate”

Since the December meeting, commentary from the Fed’s members hinted at smaller rate hikes ahead, as did the economic data. The remaining questions were how high would the Fed take rates before pausing and how long will it need to leave them there before inflation makes a sustained move towards the 2% target? 

As a result of that information, the bond market was pricing in a 25 bp hike at today’s meeting, another in March, and then a pause at the May meeting. And today, Jerome Powell and the Federal Open Market Committee (FOMC) unanimously delivered exactly what was expected.

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