Fed signaling they won't follow Trump-appointed dovish Fed chair, says Brookings' David Wessel

Core Viewpoint - The Federal Reserve is likely to implement a quarter-point rate cut amid discussions of potential candidates for the next Fed chair, with current chair Jay Powell's influence somewhat diminished due to speculation surrounding his successor [2][4]. Group 1: Rate Cut Discussion - There is a push for a half-point rate cut, but rising bond yields suggest that a quarter-point cut is more probable [1][2]. - Some Fed bank presidents may dissent against the rate cut, indicating a divided opinion within the committee [2]. Group 2: Speculation on Fed Chair Successor - Speculation regarding Powell's successor is influencing the dynamics of the upcoming Fed meeting, potentially reducing Powell's clout [4]. - Candidates like Kevin Hasset and Scott Besson are mentioned, with Hasset being favored but not without opposition from some in the bond market [5][6]. Group 3: Balance Sheet and Monetary Policy - The Fed is expected to end its period of quantitative tightening (QT) and begin expanding its balance sheet again, although not at the scale of previous quantitative easing (QE) measures [9]. - The balance sheet expansion is anticipated to align with economic growth and currency supply, rather than a significant increase relative to GDP [9][11]. - The current regime of managing ample reserves is similar to practices of other central banks globally, and concerns about the Fed's large balance sheet are considered overstated [11][12].