09-21-2017  5:15 am      •     
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NEWS BRIEFS

Tim Burgess Inaugurated as 55th Mayor of Seattle

Burgess, a former radio journalist, served as Seattle City Councilmember from 2008 to 2017 ...

Mobile Mammography Van Comes to Health Fair, Oct. 7

Onsite mammograms, music, food, health information, and fun ...

Humboldt Sewer Repair Project Update: September 15, 2017

Environmental Services continues a project to repair more than 3 miles of public sewer pipes ...

NAACP Portland Branch Invites Community to Monthly General Membership Meeting

Meeting takes place from noon to 2 p.m. Sept. 23 ...

Portland to Launch Online Platform to Ease Rental Applications

One App Oregon will reduce barriers to accessing affordable housing for the city's renters ...

U.S. & WORLD NEWS

OPINION

Jeff Trades an Unknown Known for a Known Known

Jeff Tryens reflects on life in Central Oregon ...

We Must Have A New Poor People's Campaign and Moral Revival

Bishop William J. Barber II pens an exclusive op-ed about the need for a New Poor People's Campaign and Moral Revival. ...

Rebuilding the Gulf Coast, Preparing for the Next Harvey

Bill Fletcher talks about impact of Hurricane Harvey on poor workers on the the Gulf Coast. ...

It’s Time for Congress to Pass a Hurricane Harvey Emergency Funding Package

Congressional Black Caucus Members talk about recovery efforts in the aftermath of Hurricane Harvey ...

AFRICAN AMERICANS IN THE NEWS

ENTERTAINMENT

Annalyn Kurtz CNN Money

NEW YORK (CNNMoney) -- The race for Federal Reserve chair has turned into a betting game, with the odds increasingly in favor of Larry Summers succeeding Ben Bernanke.

Current Federal Reserve Vice-Chair Janet Yellen, once the frontrunner, is now a distant second to Summers, the former Treasury secretary and adviser to President Obama, according to betting site Paddy Power.

But just because gamblers have a favorite candidate, doesn't mean the financial markets really give a hoot.

When the White House revealed Summers as one of the top contenders in early August, markets hardly reacted to the news, noted Justin Wolfers, a University of Michigan economist and senior fellow with the Brookings Institution. Stocks barely moved, exchange rates were stable, and most importantly, inflation expectations didn't budge.

If market participants believed there was a substantial difference between the ability of either Summers or Yellen to maintain low and stable inflation, a more noticeable shift would have shown up.

In short, markets judge the Summers-versus-Yellen race as a nonevent, Wolfers said. That's partly because both are considered "doves," which means they're likely to give inflation a bit of growing room if it means they can focus on stimulating the economy to bring down unemployment.

"If you talked to academic economists, they would be hard pressed to articulate major macroeconomic differences between the candidates," Wolfers said. "All the major candidates are centrist democrats."

General uncertainty about the rest of the Fed's leadership could be having a bigger impact than the Summers vs. Yellen debate, as four other top Fed officials could be leaving their posts in the months ahead.

Fed Governor Elizabeth Duke is retiring, Gov. Jerome Powell's term expires in January, and Gov. Sarah Bloom Raskin is taking a number two position at the Treasury Department. And Cleveland Fed President Sandra Pianalto, who was slated to be a voting member on the Fed's policymaking committee next year, is also stepping down.

If Summers gets Bernanke's job, it's unclear if Yellen would also leave the Fed. If she does, that would leave a sixth seat vacant among the 12 central bank voters.

Why are empty seats an issue?

Under Bernanke's leadership, Fed officials have relied partially on a communications tool known as "forward guidance," in which they alert the public of how long they plan to keep interest rates near zero.

The problem is, can their viewpoints truly be considered credible if half the key decision-makers are checking out soon?

"One generation is promising what the next generation is going to do, and it's not effective until we get a new chairman in there," said Ethan Harris, co-head of global economics for Bank of America Merrill Lynch.

He believes fear of the unknown is already driving interest rates higher, but worries about the future Fed chair only explain a fraction of the rise.

"The reason bond yields are up sharply is there's tremendous uncertainty about the Fed exit strategy, and the change in power from Bernanke to the next chairman is just one part of that picture."

The yield on the benchmark 10-year Treasury has nearly doubled in less than four months, rising from 1.6% in mid-May to 2.9% as of Wednesday. Harris estimates uncertainty about Fed vacancies alone has contributed 0.15 percentage points to the yield.

 

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