Politics & MoneyInvestments

Trump administration reportedly considering Mohamed El-Erian for Fed Vice Chair

Chief economic advisor for Allianz on White House’s list to replace Stanley Fischer

Last month, Mohamed El-Erian told the crowd at the Mortgage Bankers Association Annual Convention in Denver that it didn’t matter who President Donald Trump chose as the next chair and vice chair of the Federal Reserve, because the path for the central bank’s future was already laid out.

“Expect the Fed to hike interest rates in December. We may get a couple of rate hikes next year, regardless of who leads the Fed,” El-Erian, the chief economic advisor for Allianz and the former chief executive and co-chief investment officer at PIMCO, said last month. “You should not worry about the Fed. I say that even though we don’t know who's going to be chair or vice chair.”

As it turns out, it could be El-Erian himself taking over for the departed Stanley Fischer as the next Fed vice chair.

The Wall Street Journal’s Nick Timiraos and Kate Davidson reported Tuesday that the Trump administration is considering El-Erian to serve as Fed vice chair.

From the WSJ:

Mr. El-Erian, the former chief executive of Pacific Investment Management Co. and a former deputy director of the International Monetary Fund, is one of several candidates under consideration for the vice chair position, and no decisions have been made, according to the person familiar with the matter. The White House has placed a heavy focus on selecting a vice chair with a strong background in monetary policy, this person said.

El-Erian replacing Fischer as vice chair would be interesting, considering that El-Erian said last month that regardless of who Trump picks as the next Fed chair and vice chair, there will still be a rate hike in December and possibly a few more next year, but that it won’t really matter because the markets have learned how to deal with rate hikes without significant disruption.

As it turns out, Trump chose current Maryland Federal Reserve Governor Jerome Powell to take over for current Fed Chair Janet Yellen early next year.

And now, it could be El-Erian, who’s been outspoken on the role of central banks, filing the role of Powell’s top lieutenant.

Last year, El-Erian was the featured speaker at the ABS Vegas conference, and here’s how HousingWire’s Sarah Wheeler described El-Erian’s thoughts on central banks:

El-Erian likened the central banks of the world to a doctor that doesn't have the solution for a patient (the economy), but can't refer the patient to those who could actually do something — the policy makers on Capitol Hill for instance — because they are paralyzed. So, as opposed to doing nothing, the central banks will dispense medicine that doesn't treat the problem but buys the patient some time. Hence quantitative easing in all its forms. "The patient and the central banks are rightly concerned about side effects," El-Erian said. "We have this very precarious situation that is dependent on one policy instrument and we've over-relied on it. Some central banks are prescribing more meds and some are withdrawing the meds, so we have divergency."

For more from the WSJ on El-Erian’s potential nomination, click here or below.

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