On the July FOMC, and Cohn for Fed Chair?
In an interview yesterday Trump talked up Yellen for re-appointment but, when asked, did not rule out Cohn. As chair Cohn would be an uncertainty factor, as almost nothing is known about his monetary policy philosophy. Trump’s praise for Yellen is based on her demonstrated philosophy as Trump sees it, including a bias toward low interest rates and distrust of a too-strong dollar. Trump’s preference for such biases would rule out perma-hawk Goodfriend. Yellen has been particularly unclear about whether she would accept re-appointment. No surprises in the FOMC statement. Labor market strength was slightly upgraded, and progress on inflation was somewhat downgraded – a combination that will disappoint any remaining Phillips Curve believers. Non-reinvestment of Treasuries and MBS is now said to start “relatively soon.” We think the announcement will come at the September FOMC. With inflation faltering and the balance sheet unwind beginning, there will be no more rate hikes in 2017.