US: Fed Nominations and tax-reforms to take centre stage this week – BBH

Analysts at BBH point out that US President Trump is expected to announce new nominations to the Board of Governors in the coming days and while the focus is on the Chair, the Vice Chair is also open as other two other Governor chairs. 

Key Quotes

“For a few weeks, the market has seen Powell as most likely.  Chair Powell would not rule out a Taylor Vice Chair.   The appointment of Quarles, who will vote at his first meeting on November 1, seemed to diminish the chances of Warsh, who are personal rivals, of getting the nod.   We suggest that barring the innovation that is needed in a crisis, the general policy of the Fed is unlikely to change if Yellen is no longer the Chair.  Monetary policy is in the process of normalization, and it seems more of a technocratic function than one of partisan politics.”

“Market Impact:  Minor, though vulnerable to a surprise.  Taylor is seen as more hawkish than warranted, and Yellen more dovish.”

“Tax Reform:  The House Ways and Means Committee is expected to provide the first detailed tax reform bill toward the end of the week.  In the coming weeks, it will be debate and "marked-up" in committee.  The committee will vote on it, and it will pass.  It will then be debated, amended, and voted on by the entire floor.  Officials hope to do this before the Thanksgiving break in late November.”

“Market Impact:  Even though the initial tax bill will subject to many changes, and the situation is very fluid, there will be winners and losers in the tax reform.  The markets will likely respond accordingly despite the not knowing the final version.”