Federal Reserve Bank of San Francisco President John Williams was selected to run the U.S. central bank’s powerful New York branch, installing a top monetary economist in Fed Chairman Jerome Powell’s inner circle and a banking-industry outsider to oversee top Wall Street supervisors.
Williams, who will replace William Dudley as New York Fed president effective June 18, has spent most of his career at the Fed and is considered a centrist on monetary policy. Williams recently said that he favors the largely consensus view of three to four rate hikes this year.
As head of the New York Fed, he will have oversight of the nation’s biggest banks and wield a permanent vote on monetary policy as Powell weighs the pace of interest-rate hikes. The U.S. labor market is roaring but inflation remains slightly below the Fed’s 2 percent goal.
Williams, 55, took over his current position in 2011 from Janet Yellen after she moved to Washington. She went on to become Fed chair. Though he is a respected economist, critics wanting more Fed diversity reacted negatively to reports in recent days that Williams, a white male, was the front runner for the job. Democratic senators have demanded public hearings on the choice.
Williams often states his reluctance to monitor financial-market gyrations that consume Wall Street, which may have to change now that he’s moving to the more markets-focused New York branch. And it was during his tenure that Wells Fargo & Co. engaged in “widespread consumer abuses and compliance breakdowns,” leading to a Fed ban on its growth until the San Francisco-based bank fixes the problems.
Williams’ selection also comes as the Trump administration has reportedly settled on Richard Clarida as the front runner to fill the open vice chairman role on the White House-nominated Fed Board. If the Pimco adviser is nominated and confirmed by the Senate, he, Williams and Powell will round out the leadership troika who have steered monetary policy in recent years.
Williams was selected by the New York Fed’s board and was approved by the Fed Board in Washington. The position doesn’t require Senate confirmation.
Powell, a former private-equity executive, is the first Fed chairman in three decades to not have a Ph.D. in economics, so it could be useful for him to have a top economist and experienced monetary policy maker in his inner circle. Powell and his fellow governors in Washington don’t formally make the selection of regional Fed bank presidents, but they weigh in throughout the process and effectively have a veto because they vote on the final pick.
In a statement on Tuesday, Powell called Williams a “distinguished thought-leader in monetary policy making” whom he looks forward to working with in the years ahead.
Inflation Views
In his new job, Williams will serve as vice chairman of the FOMC. He has pushed the central bank to rethink its longer-run framework to create more policy firepower in an era of persistently low interest rates. Options include increasing the central bank’s inflation target or aiming to average 2 percent over time.