Fischer exit sharpens Trump Fed choice
STANLEY FISCHER’S surprise early exit from the Federal Reserve makes President Donald Trump’s biggest economic decision of the next few months even starker: whether to preserve continuity at the top of the nation’s central bank — or not.
Chair Janet Yellen’s term expires in February, and her reappointment hasn’t been seen as likely. Fischer, the vice-chairman, announced Wednesday he will leave the Fed in October. Both are former economics professors and longtime central bank officials. Trump also has two more governor vacancies to fill, after nominating Randal Quarles to lead the institution’s regulatory efforts.
Presidents have mostly opted for insiders since businessman G. William Miller, appointed by Jimmy Carter, lasted less than two years as chairman in the late 1970s. Fischer and the previous two Fed vice-chairs had all been central bankers before they took the post. Three of the past four chairs were central bankers, the exception being Alan Greenspan, who was a well-known privatesector economist.
Previous presidents have gone for continuity in Fed appointments because it usually pays a big dividend: stable financial markets. If confidence in the Fed is lost, falling stock and bond prices can exert a massive penalty on White House popularity and the economy. Trump told the Wall Street Journal in July that Yellen is “absolutely” a possibility for reappointment because she is a “low-interest-rate person.”
“Trump is obviously unpredictable. He has run his whole campaign and presidency as flying in the face of past practices,” said Mark Spindel, co- author of a new book on the Fed titled The Myth of Independence. “But maybe he understands something about interest rates.”
TOUGH JOB
Leading the Federal Reserve is a tough job by design. Representative Carter Glass and the framers of the 1913 law that created the institution built diversity into its structure. Turning the differing views of its 12 regional reserve bank presidents, and as many as seven governors at the Fed Board in Washington, into consensus and policy action requires both deft management and, at times, a large dose of single-minded conviction.
Even Fischer remarked on Yellen’s intellectual sparring, saying in a recent Financial Times interview that “although she looks like your grandmother, she is a lot tougher.”
Yellen is Trump’s most obvious continuity choice. However, he has also mentioned that he is considering Gary Cohn — his top White House economic adviser, and a former Goldman Sachs Group Inc. president — for the job.
The post is easier when the leadership agrees on certain fundamental ideas, such as the scope and limits of the Fed’s tools and the central bank’s independence
DESPITE ONGOING geopolitical tensions in East Asia, the Philippine Stock Exchange index (PSEi) climbed slightly yesterday to return to the 8,000 level as investors viewed positively the US government’s proposal to raise its debt ceiling, easing worries over the possibility of a government shutdown.
The bellwether PSEi went up by 39.01 points or 0.48% to close at 8,022.98 on Thursday.
The all- shares index also climbed 23.63 points or 0.49% to 4,762.84.
“Philippine equities rebounded in line with Wall Street’s recovery rally as investors shook off concerns over North Korea’s arms buildup for the time being,” read the market recap of RCBC Securities, Inc.
Wall Street climbed on Wednesday, helped by news of an agreement to extend the debt limit, as stocks bounced back from a day-earlier selloff.
The Dow Jones Industrial Average rose 54.33 points or 0.25% to 21,807.64; the S&P 500 gained 7.69 points or 0.31% to 2,465.54; and the Nasdaq Composite added 17.74 points or 0.28% to 6,393.31.
“Philippine stocks edged higher along with the US after congressional leaders and President Donald Trump agreed to extend the debt limit deadline and fund the government through mid-December,” Luis A. Limlingan, Regina Capital Development Corp. managing director, said via text.
Mr. Trump, siding with Democrats over his fellow Republicans, said he agreed to pass an extension of the US debt limit until Dec. 15, potentially avoiding an unprecedented default on US government debt.
All sector sub- indices ended in the green, with mining and oil taking the lead as it rose 222.89 points or 1.65% to 13,654.71. Services added 19.66 points or 1.13% to 1,746.4; industrials increased by 92.36 points or 0.82% to 11,243.31; property rose 20.68 points or 0.55% to 3,781.45; financials went up 5.25 points or 0.26% to 1,968.76; and holding firms climbed 10.44 points or 0.13% to 7,881.31.
AB Capital Securities, Inc. senior equity analyst Lexter L. Azurin said the market “reached a significant volume,” with the index reflecting the performance of the US markets.
Trading value went up to P7.57 billion from Wednesday’s P6.72 billion, with 1.75 billion worth of shares changing hands.
Gainers beat losers, 114 to 77, while 55 names closed unchanged. Foreigners sold more shares, leading to a net selling of P896.45 million, higher than Wednesday’s P315.63 million.
Mr. Azurin said he expects trading in the next few sessions to stay within range. “I think the market might trade sideways for the next few days given that we don’t expect any major surprise or catalysts that make significant moves, so I think that’s what the markets [ are] waiting [ for].”
Philstocks. ph senior analyst Justino B. Calaycay, Jr. said in a phone call that amid the lack of fresh inputs in the market, there will be “tough bargain hunting” while “looking closely at North Korea.” —