US President Donald Trump plans final round of Fed Chair interviews in coming days — WSJ
US President Donald Trump plans to begin his final round of interviews in the coming days with candidates to be the next Federal Reserve (Fed) Chair, the Wall Street Journal reported on Tuesday, citing senior administration officials.

US President Donald Trump plans to begin his final round of interviews in the coming days with candidates to be the next Federal Reserve (Fed) Chair, the Wall Street Journal reported on Tuesday, citing senior administration officials.

The source stated that Trump and several of his aides are set to interview former Fed governor Kevin Warsh on Wednesday. Other contenders, including White House economic adviser Kevin Hassett, are soon expected to meet with the president.

Market reaction

The US Dollar Index (DXY) pair is losing 0.04% on the day to trade at 99.20 at the press time.

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

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