“Dudley was dovish on monetary policy and it is not sure that the next president will be as dovish. The needle could move to a slightly more hawkish direction,” said Thomas Costerg, senior U.S. economist at Pictet Wealth Management in Geneva, Switzerland. “The other risk is potentially more market volatility. Dudley was pro on hand-holding the market.”
Unprecedented Stimulus
A former chief U.S. economist at Goldman Sachs Group Inc., Dudley was a central figure as the Fed injected unprecedented monetary stimulus in the aftermath of the 2008-2009 financial crisis and the worst recession in decades.
Prior to becoming president, he was in charge of managing open-market operations at the New York Fed, which implements FOMC rate decisions. If the bank’s directors decide to make another internal appointment, that could point to Simon Potter, who currently has that role.
Still, the regional bank in the past has also reached beyond the central bank to bring in an outsider. Dudley replaced Timothy Geithner, who worked at the U.S. Treasury and International Monetary Fund before shifting to the Fed. Geithner went on to become President Barack Obama’s first treasury secretary.
“There seems to be a mood in D.C. to bring back the Fed to a more boring function,” Costerg said. “We are kind of seeing that with Powell’s nomination. It will be interesting to see if the New York president follows the same pattern.”
This article was provided by Bloomberg News.