As the January 28 FOMC meeting looms, the race to replace Jerome Powell is nearly done, as Trump promised an announcement this month. We’ve seen a massive shift in the leaderboard over at Kalsh as the media hypes up Rick Rieder’s chances.
I think this is overdone but BlackRock’s Chief Investment Officer for Global Fixed Income is now the man to beat at a 48% probability.
For months, the “Two Kevins” (Hassett and Warsh) were the consensus favorites to take the helm when Powell’s term expires in May as Rieder was a distant longshot. But look at that green line on the chart. Rieder has gone from a dark horse to a 48% favorite almost overnight following his interview with Trump two weeks ago.
It’s all about the “Trump factor.” The President reportedly sat down with Rieder at the Oval Office and walked away “very impressed.” Pretty much all the hype for Rieder is based on that interview and that brief comment. There have been no real leaks suggesting it will be Rieder but he leads a team that manages $2.4 trillion in fixed income and those are good chops.
More importantly for Trump, Rieder has been vocal about the “neutral rate” being lower than the Fed currently admits and talked about 100 bps in easing. He’s floated a 3% handle for the Fed funds rate, which aligns perfectly with Trump’s desire for more aggressive cuts to juice growth.
Trump has all but ruled out Hassett but Warsh at 32% is still the favorite in my mind. He’s got the Fed experience and the reformist streak, but he’s losing momentum to the Rieder surge.
Christopher Waller is still in the mix and he would be the easiest to confirm.Choosing him might also be the best way to encourage Powell to bow out quietly rather than stay on as a governor.
Note that the total volume here is just $60 million over the life of the contracts. That’s nothing in market terms and hardly representative of the billions in fixed income and equities that will move on the actual decision.
This article was written by Adam Button at investinglive.com.
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