By Matthew Boesler
(Bloomberg) --Federal Reserve Bank of New York President William Dudley plans to retire in the middle of next year, signaling the departure of an influential, crisis-tested policy maker that will widen the leadership overhaul at the U.S. central bank.
The New York Fed said in a statement Monday that his decision will “ensure that a successor is in place well before the end of his term.”
Dudley’s term ends in January 2019, when he reaches the 10-year limit in the role.
President Donald Trump announced on Nov. 2 that Fed Governor Jerome Powell will be nominated, subject to Senate confirmation, to replace Chair Janet Yellen when her term expires in February. Vice Chairman Stanley Fischer retired in mid-October. That leaves Trump with three open slots on the seven-seat Board in Washington, plus a fourth if Yellen decides to resign her seat as governor, as is widely expected.
“Beyond the chair, the two most important people on the committee are the vice chair and the head of the New York Fed. Now both are unknown,’’ said Mark Spindel, the author of a 2017 book about the Fed’s relationship with Congress. “The unwinding of the balance sheet makes that job hugely vital.’’
The New York Fed chief serves as the vice chairman of the policy-setting Federal Open Market Committee and has a permanent vote on its decisions. In that influential capacity, Dudley has been a fierce defender of Yellen’s gradual approach to raising interest rates and allowing the central bank’s $4.5 trillion balance sheet to shrink slowly.
The New York Fed’s board of directors selects the district bank’s president, in consultation with the Fed Board in Washington.
Dudley turns 65 next year and has led the New York Fed since January 2009. The bank’s oversight of Wall Street gives it an out-sized importance relative to the other 11 regional Fed banks. Dudley said in September that Yellen has done a “fabulous job” and would be a fine choice for reappointment. Trump had Yellen on his short-list right up until he opted for Powell, who’s viewed as likely to keep the central bank on the gradual path of rate hikes that she’s sketched out.
The FOMC is next scheduled to meet Dec. 12-13, and trading in federal funds futures indicates investors expect the fifth rate increase since it began tightening policy in December 2015.
A former chief U.S. economist at Goldman Sachs Group Inc., Dudley was a central figure as the Fed injected unprecedented monetary stimulus in the aftermath of the 2007-2008 financial crisis and the worst recession in decades.
Prior to becoming president, he was in charge of managing open market operations at the New York Fed, which implements FOMC rate decisions. If the bank’s directors decide to make another internal appointment that could point to Simon Potter, who currently has that role.
Still, the regional bank in the past has also reached beyond the central bank to bring in an outsider. Dudley replaced Timothy Geithner, who worked at the U.S. Treasury and International Monetary Fund before shifting to the Fed. Geithner went on to become President Barack Obama’s first treasury secretary.
To contact the reporter on this story: Matthew Boesler in New York at [email protected] To contact the editors responsible for this story: Alister Bull at [email protected] ;Brendan Murray at [email protected]