Fed Leadership Questions Aside, Policy Outlook Getting Clearer

Fed Sees Limited Wage Pressures in Tight Labor Market

The surprise departure of Federal Reserve Vice Chairman Stanley Fischer has added to uncertainty about a transition in leadership at the U.S. central bank in coming months, along with a report that White House adviser Gary Cohn is unlikely to be tapped as the next chief.

Yet the most important news Wednesday for the immediate Fed policy outlook was arguably the deal between President Donald Trump and lawmakers to kick the debt-ceiling can down the road by three months. 

Recall that the Fed already has a plan in place to shrink its $4.5 trillion balance sheet by scaling back reinvestment of maturing bonds and is just waiting to put it into action. With smooth sailing ensured for the next several weeks in the Treasuries market, thanks to the debt-ceiling deal, that may make current Fed policy makers more comfortable about getting started next month. The next policy decision comes Sept. 20, set to be Fischer’s last.

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