Powell Will Remain at Fed, Some Traders Predict

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Abstract: Traders on Kalshi are confident that Jerome Powell will keep his job as Fed Chair, as President Biden is expected to name his replacement very soon.

The Scene:

Senator Sherrod Brown suggested on Monday that President Biden’s decision to renominate or replace current Federal Reserve Chairman Jerome Powell was “imminent.”

The renomination saga is peaking after inflation way overshot expectations in October, with the CPI coming in at an extremely high 0.9%. Looking ahead, monthly inflation in November is predicted to be above 0.3% with almost 100% certainty, and has a 73% chance of being above 0.6%.

The supply chain disruptions that are contributing to this inflation are also having an impact on economic growth. Real GDP growth in the third quarter missed projections, coming in at only 2%. The likelihood that it improves on that level in the fourth quarter is 73%. 

Why it matters:

Powell has presided over the first bout of inflation that the U.S. has seen in years. So far, he’s refused to raise interest rates, and has remained committed to a policy designed to achieve full employment. At the same time, he’s refused to engage with Progressives on issues like climate risks to the financial system, or racial justice issues in monetary policy.

The primary candidate for Powell’s replacement is Lael Brainard, an economist on the Federal Reserve Board of Governors. Brainard has proven to be much more concerned about climate change than Powell, and while they share the belief that the current bout of inflation is transitory, she is also more dovish. A Brainard Fed would be much more tolerant of inflationary risks in the pursuit of full employment than one run by Powell.

What Might Happen

The likelihood that Powell is renominated is holding at around 74%, which gives nearly 3 in 4 odds that Powell will retain his post.

This probability comes from traders on Kalshi, where people can buy “yes” or “no” on a market asking “Will Jerome Powell be Replaced?”. They earn a return based on whether their trade was correct.

Kalshi has markets for a wide variety of events, providing forecasts for future levels of taxes, COVID-19 cases, mortgage rates, and CO2 emotions. You can also trade on whether the Fed will raise interest rates, whether the reconciliation bill will be passed, and whether unemployment will increase.

These forecasts can provide information that gives you greater insight into the risks that you face with your own portfolio. 

To see more forecasts, sign up at kalshi.com!

Note: The content of this article does not constitute professional or financial advice and is information of a general nature.

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