WASHINGTON: The influential and longstanding head of the New York Federal Reserve Bank announced Monday he will retire in mid-2018, six months before his term expires.
The departure of William Dudley could further change the complexion of the Fed’s key monetary policy body, but unlike with other vacancies, President Donald Trump has no official say in naming his replacement.
Trump last week announced his decision to replace Federal Reserve Chair Janet Yellen with Fed Governor Jerome Powell when her term expires in early February.
There are currently three vacancies on the Fed board that Trump can fill, with a fourth possible if Yellen decides to leave the board. She could stay on through 2024 once her term as chair ends.
Dudley “intends to retire from his position in mid-2018 to ensure that a successor is in place well before the end of his term,” the New York Fed said in a statement.
His term ends in January 2019 when he reaches the 10 year policy-limit in the role, and the bank’s board of directors already have begun a nationwide search for a replacement.
The New York Fed has a key role in monetary policy since its president has a permanent seat on the interest-rate- setting Federal Open Market Committee and serves as its vice chair.
The other 11 regional Fed presidents rotate onto the FOMC for the four voting slots, although they all participate in the discussions along with Fed governors.
And the New York Fed is the institution that implements monetary policy decisions in order to alter the interest rate, through its open market operations, buying and selling securities.
Dudley has been supportive of the Fed’s go-slow strategy on raising interest rates in the wake of the global financial crisis, to be sure the economy is on solid footing and in the absence of inflation, as well as playing a key role in designing banking safeguards and regulations.
Yellen praised Dudley for his “enormous contributions” to the FOMC.
“The American economy is stronger and the financial system safer because of his many thoughtful contributions,” Yellen said. “The Federal Reserve System and the country owe him a debt of gratitude.”
The search committee to find Dudley’s successor will be led by New York Fed’s non-bank board members.
“The committee is conducting a nationwide search to identify a broad, diverse and highly qualified pool of candidates,” the statement said.
‘Apolitical’ selection process
The Fed has come under increasing pressure in recent years to include more women and minorities in influential positions, as the board and regional bank presidents are overwhelmingly white males.
The choice to replace Dudley will be subject to approval of the Fed’s board.
Analysts at Barclays Research said the selection of a regional Fed bank is “fairly apolitical,” but stressed “we believe this will be the second most important nomination within the Federal Reserve system after Powell’s nomination for chair last week.”
In addition to his support for the gradual interest rate increases, Dudley has repeatedly warned of the dangers of rolling back the tougher bank regulations put in place in the wake of the crisis.
In a speech Monday, Dudley again urged that any reforms “be made carefully — with a paring knife, rather than with a meat cleaver.”
“We should not lose sight of the horrific damage caused by the financial crisis, including the worst recession of our lifetimes and millions of people losing their jobs and homes,” Dudley said.
“We had a woefully inadequate regulatory regime in place, and while it is much better now, there is still work to do.”