Having people who are “outside the mainstream” on the Federal Reserve’s Board of Governors won’t create “huge amounts of problems” because they won’t set the path for monetary policy alone, former New York Federal Reserve President William Dudley said.
Judy Shelton, who is President Donald Trump’s contentious pick for a place on the board, together with fellow Fed nominee Christopher Waller, the director of research at the St. Louis Fed, this week cleared a key hurdle to confirmation by winning the approval of a majority on the Senate Banking Committee.
They “will have a voice, but they will not actually set the path for monetary policy or regulatory policy — that will be set by Jay Powell and Randy Quarles,” Dudley said Thursday in an interview on Bloomberg Television and Radio, referring to the Fed chair and one of two vice chairs.
Shelton is a strict inflation hawk who long favored returning the U.S. to the gold standard and has questioned the need for a central-bank-controlled benchmark interest rate.
“Returning to the gold standard would result in a tremendous increase in the volatility in interest rates; when gold prices go up, the Federal Reserve would have to raise rates, when gold prices go down the Federal Reserve would have to lower interest rates regardless of what was happening in the real economy, regardless of what’s happening with inflation regardless of what was happening to the employment rate,” Dudley said. “The gold standard is not a good anchor for U.S. monetary policy.”
Shelton has drawn sharp criticism for her unorthodox views on monetary policy and for her sudden willingness to espouse an approach that hews with the president’s. She could still fall short before the full Senate, where four Republican defections could block her confirmation.
