Chances of Jerome Powell staying on for a second term

Last week, Fed Chair Powell came under heavy criticism from Senator Elizabeth Warren. Market forecasts showed Powell's chances of reappointment declining. Here's what that could mean for the stock market and investors.

The term of current Federal Reserve (Fed) Chairman Jerome Powell expires in February and US President Joe Biden has yet to appoint him to a new four-year term.

Although Powell has strong bipartisan support, events in recent weeks have reduced his chances of reappointment.

Last week the central bank governor appeared before the Senate Banking Committee, where he argued that the Fed's response to the Covid pandemic was correct and outlined the state of the US economy. The report was heavily criticised by Senator Elizabeth Warren, who said she would oppose Powell's re-nomination.

Elizabeth Warren said: "Your record is of grave concern to me. You have taken action to make our banking system less secure and that makes you a dangerous man to lead the Fed."

Also on Friday, another Fed official came under scrutiny for illegal personal trading activities. According to Bloomberg News, Fed Vice Chairman Richard Clarida traded between $1m and $5m from bond funds into equity funds on 27 February 2020 the day before Powell issued a statement signalling imminent policy action amid a worsening pandemic. And while these trades are reportedly "planned rebalancing" by the Fed, they raise public suspicion because of recent precedents of Fed chiefs resigning over similar allegations.

While Powell is not directly responsible for the Fed's regional presidents, Clarida was on the Board of Governors of the Fed, for which he is responsible.

Warren has called for a ban on the ownership and trading of individual stocks by senior Fed officials.

As recently as a month ago, the odds of Powell's re-nomination hovered between 80% and 90%, according to the non-profit forecasting organisation PredictIt. However, following Warren's comments last week, those odds dropped to 61% before recovering slightly. On Monday, the site showed a prediction of an appointment at 63%. Among the candidates named by Warren: Lina Khan as head of the Federal Trade Commission and Rohit Chopra as head of the Consumer Financial Protection Bureau.