John Williams was named President of the Federal Reserve Bank of New York on Tuesday, successor to William Dudley. He brings monetary policy chops, a long history with the central bank, and some strange quirks.
Over the years, his public speeches have provided some important insights into the 55-year-old economist, who takes the lead in one of the most important roles in the global financial system. The job carries a permanent vote on interest rate decisions and traditionally the deputy chairmanship of the Federal Open Market Committee; a direct connection to Wall Street's largest banks and brokers; and a place in the front row among international banking supervisors. Williams, who is currently leading the Fed's San Francisco Bank, will start in New York on June 1
. 1 Hard to label
Although he was considered a monetary pigeon in the early days of his seven-year tenure to San Francisco's helmet, Williams was recently referred to as a hawk: in mid-2016 he found him pushing for two or three rate hikes (the Fed made one) and in mid-2015 he demanded two (the Fed also made one this year). But his recipes were pretty much consistent with what his colleagues said in their quarterly economic projections, and that remains the case. Williams is currently saying that this year would see a hike of three to four quarters, which would put him in the middle of the range of forecasts updated by officials in March. He always stresses how important it is to be data-dependent, and his views are slowly shifting.
As one would expect of a centrist, Williams has never deviated from a Fed decision.
. 2 Fed Veteran
Williams has spent almost his entire career with the Fed, as the following schedule shows. Former Fed chairman Janet Yellen made him research director of San Francisco when she was president of the regional bank. He followed her in 2011 to the top position. He co-authored influential work with two of the most cited researchers in the Fed system, Thomas Laubach, who is now director of the Fed's money affairs department, and David Reifschneider, formerly Yellen's personal economic adviser.
3. R-Star and Rethink
Fed officials have increasingly adhered to the concept of a "neutral" interest rate in their communications on their political strategy. The idea is that interest rates will boost economic growth until they are raised above the neutral rate known in the business jargon as "r-star." And Williams literally has his name on it: the formula he originally developed in 2001 Paper with Laubach is the most frequently mentioned estimate of the neutral rate.
The Laubach-Williams model suggests that the neutral rate has dropped significantly since the financial crisis and may not rise again in the foreseeable future. That's why Williams is increasingly associated with another big idea that is currently shaping the political debate: if the neutral interest rate is now so much lower than in the past, the Fed should consider raising its inflation target. Higher inflation would lead to higher interest rates than usual, which would allow the Fed to cut interest rates in response to future economic downturns.
. 4 No Banker
Williams's past does not include any activities in the financial industry. This could help avoid frequent criticism: Fed officials being too close to the companies they oversee. This lawsuit was sometimes filed against Dudley, who came to the central bank from Goldman Sachs.
But a lack of bank accounts can have disadvantages. The president of the New York Fed sits at the interface between financial markets and the economy, communicates regularly with the largest banks in the US and brought real experience in Dudley's case. Williams likes to point out that he does not have a Bloomberg terminal on his desk – the implication is that he shuns himself to avoid paying attention to short-term market fluctuations.
That's not necessarily a bad thing, but it's likely to change for a role that oversees Wall Street. The last president of the New York Fed to make a similar leap was Gerald Corrigan, who moved from the Minneapolis Fed to the Big Apple in 1985.
. 5 Whimsical Character
Williams, who has romantically changed over the virtues of insular clothing during a recent appearance in Hawaii, likes to make speeches full of song references – Rockband Green Day is an example of that – which is quite unusual for a Fed -Official. He also loves to play video games (Dark Souls is his favorite) and he is an avid reader of fiction.
Another funny fact: John Taylor – a lewd critic of Fed policy in recent years, who is also famous for creating a widespread monetary policy rule – was Williams' thesis adviser at Stanford University, where he earned his doctorate. Williams, who is married to two sons, is originally from Sacramento, and his father served as counselor to four California governors in succession.