Coverage: Fed vice chair Fischer resigns

Stanley Fischer, the vice chairman of the Federal Reserve Board, said Wednesday that he would resign in mid-October, an unexpected decision that gives President Donald Trump greater leverage over central bank policy.

Binyamin Appelbaum of The New York Times had the news:

Mr. Fischer, 73, cited “personal reasons” in a brief letter addressed to Mr. Trump. His four-year term was to have ended next June.

The resignation puts immediate pressure on the Trump administration to replenish the Fed’s depleted board. Mr. Fischer’s departure would leave only three people in the seven board seats, the smallest number of governors in the Fed’s history.

It also means that Mr. Trump can appoint a majority of the Fed’s board, bending the direction of its policy. Mr. Trump has repeatedly said that he wants the Fed to loosen some of the regulatory strictures it has imposed in response to the 2008 financial crisis.

Among the decisionsthe president will have to make is whether to replace Janet L. Yellen as chairwoman or keep her on when her four-year term ends in early February. He faces a choice between a nominee who, like Ms. Yellen, stresses economic growth, or someone more palatable to conservatives who favor greater emphasis on curbing inflation.

Christopher Condon and Craig Torres of Bloomberg News reported that his resignation was a surprise:

Fed watchers had expected he would step down but not with eight months remaining in his term. His departure will remove an influential voice at a time when the central bank appears divided on the need to hike interest rates again this year despite lower-than-desired inflation. He’s also been a powerful advocate for maintaining post-crisis financial regulations that the Trump administration wants to roll back.

“Fischer was the voice of experience, having been a central banker and his international standing was impeccable,” JPMorgan Chase & Co.’s Chief U.S. Economist Michael Feroli said. “It adds a further element of uncertainty to policy and who will be running policy early next year. It adds to the cloudiness of the outlook for monetary policy.”

Policy makers are expected to announce a timetable to start shrinking their $4.5 trillion balance sheet when they meet Sept. 19-20 in Washington, while leaving rates on hold as they debate another hike before year-end, as officials projected in June.

Fischer’s departure will leave four of the seven seats on the Fed Board vacant. Trump has nominated Randal Quarles, a senior Treasury official under President George W. Bush, to be a governor and head up the Fed’s regulatory efforts. Quarles’ nomination is still pending before the Senate.

Akin Oyedele of Business Insider reported that Fischer was aligned with Fed chair Janet Yellen:

In July, Trump nominated former Treasury undersecretary Randy Quarles as the Fed’s vice chairman of supervision to oversee the banking industry.

The central bank is preparing to start unwinding the $4.5 trillion balance sheet it built up by buying bonds and other assets after the recession. This effort is another step the Fed is taking to gradually reverse its crisis-era policies that are less necessary now that the economy is in an eighth year of expansion.

Fischer is widely considered a centrist on monetary policy whose views are closely aligned to Yellen’s. “He represented the board internationally with distinction and led our efforts to foster financial stability,” Yellen said in a statement. “I’m personally grateful for his friendship and his service.”

Fischer, 74, was governor of the Bank of Israel for eight years before joining the Fed. He holds a Ph.D. in economics from the Massachusetts Institute of Technology.