Alex Brummer says Jay Powell’s reelection is the safest choice for the Fed chief
Jay Powell’s reelection as chairman of the Federal Reserve is a safe choice. It is not easy to nominate a Republican who first elected President Biden’s rejected predecessor, Donald Trump.
At a critical juncture in the post-Kovid economy, the US president was advised that this was not the right moment to make a change.
The US Central Bank has ordered Congress to maintain monetary policy to balance the labor market’s need against inflation.
Critical Time: Republican Jay Powell (pictured) nominated for second term as US Federal Reserve President
That’s why Powell has seen a 6.2 percent inflation rate, staying true to ultra-low interest rates and continuing the US’s bond buying program.
The Fed has begun to reduce its $ 120 billion (£ 89 billion) month to $ 15 billion (£ 11 billion) a month and previously said it would not raise official interest rates by up to 0pc in November. Completed the ‘tapering’ of bond purchases.
Cynics argue that Powell has prevented interest rates from rising until he is reinstated. In an unusual move, his chief rival for the job, Democrat Lale Brainard, has been elected vice president, a position usually held by the head of the New York Fed.
Her promotion to second place is seen as a political move to appease Democrats who want their own one on Capitol Hill.
It would seem unlikely that Powell would raise the rates until re-affirmed by the Senate. However, even though markets welcome their re-nomination, they hate change and they are unlikely to be put on hold once they are confirmed.
As the US economy bounces off the epidemic, its low-income black citizens find it increasingly difficult to get re-employed and, as a result, keep rates low until employment equality is restored.
The same token inflation hurts low-income families more than good families who rely less on cheap food and gasoline (petrol).
The problem is that the Fed has released a financial monster by preventing it from raising rates so far and continuing with quantitative easing.
The money supply has skyrocketed over the past two years and on the advice of social media sites such as Reddit, more cash has flowed into speculative activity in the form of special purpose acquisition companies (SPACs), crypto currencies, private equity and retail investment. .
When the day of reckoning comes and interest rates start to rise, the shock for equity markets is deepening.
He won’t do anything drastic until Powell navigates his way through his re-nomination hearing.
That may give the Bank of England a bit of a breather before it starts raising rates to combat our own 4.2 percent inflation.
Being the first of the major central banks to break the post-pandemic orthodoxy – high rates make no difference to supply-side shock – can be tricky.
Governor Andrew Bailey showed unexpected decisiveness at the start of Kovid. They may again be tempted to show decisiveness and correct the market reputation for volatility.
Mines have been cut
A third of Peruvian natural resources stocks related to Hochchild mining may have more to do with volatile South American politics than anything else. But it also demonstrates the vulnerability of the sector to decisions based on climate change.
Four mines – controlled by two Hochchilds – in the South Ayacucho area will be closed on environmental grounds following the weekend’s announcement by Peru’s Prime Minister Myrta Vasquez.
Paradoxically, Peru is the largest producer of copper, gold, silver, zinc and tin. Copper is especially important as the world makes electrification a priority.
Other London-quoted miners interested in Peru – including Anglo American and Glencore – are watching carefully.
Lima’s leadership must be careful not to turn the mining economy into a basket case just like what happened in Venezuela when it took free market capitalism.
BT’s new president, Adam Crozier, may want to keep an eye on events at Telecom Italia.
Initially partnered with Italy’s slow broadband roll-out, private equity giant KKR has now launched a £ 9 billion offer for the entire network.
Be careful what you want.