Fed stalwart William Dudley to retire by mid-2018

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The Federal Reserve Bank of New York confirmed on Monday that William Dudley, among the most influential monetary policymakers throughout the financial crisis and its aftermath, expects to retire by mid-2018, raising another question over leadership at the US central bank less than a week after President Donald Trump chose a new Fed chief.

Dudley, 64, one of the central bank’s strongest advocates of unprecedented monetary stimulus in the last decade and a steady hand on its delicate market operations, will step down before his term as president officially ends in January 2019.

The New York Fed’s board said its search committee had already begun its work, and aims to name a successor by the middle of next year.

The announcement accelerates a revolution in Fed leadership that could upend its cautious approach to raising interest rates and to shedding some of the $3.5-trillion in bonds purchased to stimulate the economy in the face of the 2007-2009 crisis and recession.

The 12 regional Fed presidents, chosen by their regional directors and approved by the Fed board, vote on policy on a rotating basis.

Reuters Photo.

The New York Fed president is unique in that the position has a permanent vote on the policy-setting Federal Open Market Committee (FOMC), serves as its vice chair, and acts as its eyes and ears on Wall Street and often as its liaison to international counterparts.

Trump, a Republican who seeks to pare down the central bank’s tough financial regulations while keeping rates moderately low, on Thursday named Fed Governor Jerome Powell as successor to Janet Yellen when her term ends in February. This decision broke a precedent of Fed chairs serving at least two terms.

The White House has an unusually large window to reshape the Fed given three more seats are vacant on its powerful seven-seat Board of Governors. The Fed’s well respected vice chair, Stanley Fischer, and its point-person on bank supervision, Daniel Tarullo, stepped down earlier this year as the overhaul gained steam in the wake of the 2016 US election.

A former Goldman Sachs chief economist, Dudley joined the New York Fed as its markets head in 2007 and took its helm in the depths of the crisis in early 2009.

He has since steered a mostly dovish path as a close ally of Yellen and her predecessor Ben Bernanke, often flagging pending policy changes that influenced world financial markets. Recently, however, he has advocated a more aggressive tightening plan even while inflation has drifted lower below target.

He said in a speech this week that the stable US economy and internal Fed consensus on policy made it an ideal time for a leadership transition.

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Source(s): Reuters