The Fed's perfect storm of 2018

I see that the world is catching up to me. The resignation of Federal Reserve vice chairman Stanley Fischer has sharpened the focus of analysts on the future composition of the Fed Board in determining the direction of monetary policy. This is a topic that I have been writing about since June (see A Fed preview: What happens in 2018?).

As well, in light of leaks indicating that Gary Cohn is no longer the front runner to be the next Fed chair, there has been widespread speculation as to the identity of the next Fed chair in determining interest rate policy. A number of commentators, such as Pedro da Costa, have speculated that Trump's demand for personal loyalty is likely to usher in an era of a highly politicized Federal Reserve and destabilize the Fed's credibility. This factor is particularly acute as there will be four vacant seats on the Fed's Board of Governors after Fischer's departure - and that does not include the possible replacement for Janet Yellen.

In other words, we have potential chaos at the Fed in 2018.

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