Trump could influence FOMC quickly - BTMU

Analysts at Bank of Tokyo Mitsubishi explained that there are countless uncertainties that have emerged for the financial markets to grapple with in the aftermath of the surprise presidential election victory for Donald Trump last Tuesday.

Key Quotes:

"But one very crucial one that is likely to get greater focus this week with Fed Chair Yellen testifying to the Joint Economic Committee of Congress will be the make-up of the FOMC and how it might alter market expectations over the direction of monetary policy.

Firstly, we will make the assumption that Fed Chair Yellen stays on until her term expires on 3rd February 2018. We would stress though, that is not a forgone conclusion. It is notable that Trump’s last campaign advertisement while running a caption of George Soros and Janet Yellen states that “those who control the levers of power in Washington and for the global special interests, they partner with these people that don’t have your good in mind”. That’s pretty explicit criticism of the Fed Chair and of course followed accusations of working with Obama to help improve the chance of a Clinton victory by keeping rates low. But even assuming Chair Yellen remains until the expiry of her term, President-elect Trump can still quickly influence the composition of the FOMC. There are already two vacancies on the Board of Governors to be filled and the removal of gridlock between the White House and Congress means appointments can be made relatively quickly.

In addition, the number of vacancies may well increase further. One role that has not been filled for six years was a new Fed Vice Chairman for Supervision role that has essentially fallen to Governor Tarullo. It is widely believed that Governor Tarullo plans to step down once a new administration is up and running, essentially meaning three new Governors could be placed by Trump in the early stages of his presidency."