If Judy Shelton, who advocates for lower rates, wins confirmation to the Federal Reserve Board of Governors, President Trump may have his choice to replace Chairman Jerome Powell.
The president has been openly critical of the Fed, and especially Powell, for not lowering interest rates. Powell’s four-year tenure as Fed chair expires in February 2022.
While some doubt Shelton’s ability to win Senate approval, “Confirmation is a real possibility,” Grant Thornton Chief Economist Diane Swonk said in a tweet. “That could put her in line to replace @federalreserve Chairman Powell.” Such a move would cause “rebellion” in the Fed, which in turn “could wreak havoc on financial markets,” she said.
Despite the negative tweets, “Jay Powell has delivered a near Goldilocks economy for Trump to campaign on,” said Dec Mullarkey, managing director for investment strategy at SLC Management. “Powell’s formidable dovish pivot last year kept the economy on track and the equity bull market intact. His promise to stay on pause until the data shows significant momentum either up or down is creating a very supportive backdrop for consumers and businesses.”
And while Trump may have looked into firing the chair, Powell’s “track record and support among lawmakers creates a high bar for needing to meddle with a policymaker that is unequivocally delivering.”
Of course, the confirmation process could be contentious, given her views, and Senate approval is “highly uncertain at best,” according to Mises Institute President Jeff Deist. Even if Trump emerges from the impeachment process “relatively unscathed politically, she still faces headwinds.” While she doesn’t carry “as much baggage as some of Trump's past stillborn nominees (Marvin Goodfriend, Herman Cain, Stephen Moore) … she still is viewed as an odd choice.”
The other nominee, Christopher Waller, also appears “inclined to embrace Trump’s advocacy for a more relaxed monetary policy,” said Sarah Bauder, senior market analyst at SophisticatedInvestor.com. “Although the confirmation process will likely be a lengthy one, both Shelton and Waller will undoubtedly sit on the Fed board by year's end.”
Data
Existing homes sales rose 3.6% in December to 5.54 million pace from a 5.35 million seasonally adjusted annual rate a month earlier, and were up 10.8% from a year ago, the National Association of Realtors said Wednesday.
Economists polled by IFR Markets expected a 5.43 million rate.
“Low inventory remains a problem, with first-time buyers affected the most,” said NAR Chief Economist Lawrence Yun. Indeed, only 1.4 million units were on the market in December, down 14.6% from a month earlier and 8.5% lower than last December. Homes on the market declined every month since June, when there were 1.92 million existing homes for sale.
The median price was $274,500, up 7.8% from the prior December, when the median was $254,700. “Price appreciation has rapidly accelerated, and areas that are relatively unaffordable or declining in affordability are starting to experience slower job growth,” Yun said. “The hope is for price appreciation to slow in line with wage growth, which is about 3%.”
Sales gained in December in the Northeast (7.3%), South (12.9%) and West (6.0%) regions, but slipped 1.0% in the Midwest region.
“Typically, the inventory of homes on the market drops at the end of the year,” noted Mortgage Bankers Association Chief Economist Mike Fratantoni. “However, the supply of existing homes is now at a record low, and this will constrain the pace of sales this spring from being even stronger. However, the recent gains in new home construction is a positive, as the total inventory on the market will allow prospective buyers to find properties.”
Separately, the Federal Reserve Bank of Chicago’s National Activity Index suggested below-average growth as it slid to negative 0.35 in December from positive 0.41 in November. The three-month moving average (CFNAI-MA3) narrowed to negative 0.23 in December from negative 0.31 in November.
The diffusion index widened to negative 0.27 in December from negative 0.25 in November.
