Kevin Warsh, the favorite to be the next chairman of the U.S. Federal Reserve, apparently believes the central bank has become a servant to the stock market after years of loose monetary policy.
Warsh, a former Fed governor, met with both President Donald Trump and Treasury Secretary Steven Mnuchin on Thursday. He is viewed as more hawkish than Janet Yellen, whose current tenure ends in February.
Warsh's possible appointment has caused both U.S. bond yields and the dollar to move higher. Warsh was not immediately available for comment when contacted by CNBC.
As of Monday the PredictIt probability market had Warsh as a 33 percent favorite to be the next Fed chair, ahead of Jerome Powell on 26 percent and incumbent Yellen on 17 percent.
Too hawkish for Trump?
While Warsh may fulfil Trump's desire to reduce regulation, he may also want to raise interest rates at a more aggressive pace. This could be seen as a stumbling block to the president's stated preference for a low dollar.
But Aaron Kohli, director of fixed income strategy at BMO, told CNBC Friday that Trump may gamble on a dilemma that never comes to pass.
"It becomes muddier because most people that sit in that seat have to moderate their views based on reality, and the reality is that inflation isn't moving," said Kohli.
"As much as we believe he would taper aggressively, and raise rates aggressively, it might not come to that."
Reference: CNBC
Read More: https://www.cnbc.com/2017/10/
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