Janet Yellen's No. 2 at the Fed is stepping down
Federal Reserve vice chair Stanley Fischer is resigning from his post at the central bank effective in mid-October, the Fed announced Wednesday.
Fischer cited “personal reasons” in his resignation letter to President Donald Trump. Fischer’s term as vice chair was slated to end on June 12, 2018.
“It has been a great privilege to serve on the Federal Reserve Board and, most especially, to work alongside Chair [Janet] Yellen as well as many other dedicated and talented men and women throughout the Federal Reserve System,” Fischer wrote.
Fischer is seen as the second-most influential member of the Federal Open Market Committee — the Fed committee that sets monetary policy — behind only Chair Janet Yellen. His early departure from the Fed also adds another layer of intrigue to the upcoming decision from Trump on who to appoint to the Fed’s top spot; Yellen’s four-year term is set to expire in February 2018.
Reports have indicated that Yellen and Trump’s chief economic advisor Gary Cohn, formerly the president and COO at Goldman Sachs (GS), are the top two candidates for the role. Were Trump not to nominate Yellen for a second term, it would mark the first time since 1978 that a sitting Fed chair was not renominated by a new president. Yellen’s predecessor, Ben Bernanke, served two terms from 2006-2014, spanning both the Bush and Obama presidencies.
In a note to clients on Wednesday, Paul Ashworth, chief US economist at Capital Economics, wrote that Fischer’s resignation “presumably lowers the odds of [Yellen] being nominated for a second term [as Fed Chair].” In addition to the pending vacancies at the top of the Fed, there are currently three vacancies on the Fed’s Board of Governors, who along with five rotating regional Fed chairs comprise the 12-member FOMC.
Michael Feroli, an economist at JP Morgan, said Wednesday that Fischer’s resignation was a “surprise,” adding that, “his earlier-than-expected exit only adds to the uncertainty regarding Fed leadership over the coming months.” As for pending monetary policy decisions — the FOMC’s next policy announcement is due out on September 20 — Feroli said Fischer’s resignation may slightly lower the odds of another interest rate hike in December, currently seen as the earliest a change in benchmark rates could be made by the Fed.
Last month, Yellen spoke at the annual Jackson Hole Symposium, the year’s top meeting of central bankers and economists from around the world, and gave an ardent defense of the U.S. government and the Fed’s regulatory response to the financial crisis. Many economists saw Yellen’s speech as something of a parting shot at Trump, who has made clear he wants to cut regulations on the banking industry.
Michael Pearce, Ashworth’s colleague at Capital Economics, wrote in August that Fischer is the “most ardent defender of the status quo” among Fed officials, adding that it seemed likely Trump would seek to replace Fischer with someone more sympathetic to his deregulatory agenda.
In a statement on Wednesday, Yellen said, “Stan’s keen insights, grounded in a lifetime of exemplary scholarship and public service, contributed invaluably to our monetary policy deliberations.”
Adding that, “[Fischer] represented the Board internationally with distinction and led our efforts to foster financial stability. I’m personally grateful for his friendship and his service. We will miss his wise counsel, good humor, and dry wit.”
Fischer had previously served as the governor of the Bank of Israel from 2005-2013, in addition to posts at Citi, the IMF, and the World Bank.
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Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
