The Fed is keeping rates steady. Rieder hypothesis for the presidency

Fed, Wednesday will keep i unchanged rates and should leave them that way throughout the quarter, until March, and probably until the end of the president’s term Jerome Powellwho will leave on May 26th, which means that it will be discussed again at the June 16-17 meeting, or at the July 28-29 meeting. This was revealed by Reuters, according to which this is quite a change compared to last month, when most operators expected a cut by March.

However, the attention of markets now she’s all focused on the name of future president. According to Treasury Secretary Scott Bessent, Donald Trump could decide who will replace Powell as early as next week. And this announcement, analysts comment, “would overshadow anything Powell had to say on Wednesday”. However, it is not easy to understand who will be the chosen one. Rick Riedermanager of BlackRockaccording to the Financial Times is emerging as a major one candidates for president of the Federal Reserve.

His shares on the Polymarket forecasting site increased from 6% at the beginning of the week to 47% on Friday, but in reality Rieder has always been considered an outsider, an outsider, a banker at BlackRock, where he manages bond portfolios for trillions of dollars. Trump praised him publicly in Davos, as Rieder brings a strong market-oriented view, shares the US president’s view that Fed officials are overestimating the dangers ofinflation and claims that theartificial intelligence will have a structurally disinflationary impact and that the Fed will not have to tighten it too much monetary policy to the detriment of employment.

The profile of the other candidates

Rieder’s name was at the bottom of the list of ‘candidates’, but he made his way forward after Kevin Hassent, the favorite chief of the White House economic advisors, the one who all observers considered closest to Trump, withdrew. The other Kevin, the former Fed advisor and former Morgan Stanley banker Kevin Warsh was in pole position so far, but its odds on Polymarket dropped from 64% at the start of the week to 35% on Friday. The reason? Warsh enjoys a good reputation on Wall Street, but is considered a ‘hawk’ in monetary policy and he is not exactly Trump’s favourite, because he is more ‘stingy’ than Hassent sui rate cuts. In fact, from this point of view he is more similar to Powell and would certainly start with some cuts, but then tend to make few.

Internal resistance and speculation

At the bottom of the list there is then Christopher Wallera central bank governor and member of the Fed board, appreciated by CEOs and financial professionals for his technical expertise. Recently, he argued for the need for reduce interest rates without appearing politically aligned with the White House and therefore it is the one that institutionally would most guarantee theindependence of the central bankwhich in Trump’s eyes is not a plus. In short, this explains why Rieder currently appears ahead of the other candidates, even if, as White House spokesman Kush Desai stated: “Until President Trump makes an announcement, any information on the nomination process for the Federal Reserve chairman is useless speculation.” Furthermore, as stated by Bernard Yaros, US economist at Oxford Economics, “within the Fed there will be more resistance than ever on the choice of the next president, especially due to thecriminal investigation into Powell. And I don’t expect that the president will ultimately be able to fill the board of the institution with people who will cut rates.”

The outlook on Federal Reserve rates

Returning to Wednesday’s meeting, it must be said that there is a lot of division in the Fed not only on rates but also on the role of the institute and on monetary policy prioritiesalthough at the moment the expectations of one sustained growth of the US economy do not recommend short-term cuts, also because theinflation will remain above the Fed target of 2%. In any case, most economists still predict at least two cuts by the end of the year and none in the next few days, while 58% do not expect any changes this quarter. “In reality – says Jeremy Schwartz, senior economist at Nomura – we think that the Federal Reserve will remain on hold for the remainder of Powell’s term, until May, and which new leadership will usher in 50 points of cuts later in the year.”