“In the letter, Fischer said jobs growth had returned to the United States and that “steps to make the financial system stronger and more resilient” had been taken – actions that may now be weakened by the Trump administration.
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Fed Chair Janet Yellen’s term expires in February. While Trump has spoken approvingly of her performance he has also kept the door open to naming his top economic adviser Gary Cohn, or someone else, to the job.
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“This will certainly leave us all scrambling to understand the new calculus of the Board,” said Carl Tannenbaum, chief economist at Northern Trust in Chicago.
In the shorter term, Fischer’s departure in October may lower the likelihood of another Fed interest rate increase this year.
As some of his colleagues began wondering about a permanent downshift in global inflation and interest rates, Fischer maintained an underlying faith in the macroeconomic models – which he helped refine – that showed falling unemployment ultimately raising inflation and requiring higher interest rates in response.