Stanley Fischer is retiring from the Federal Reserve. The vice president of the United States central bank said he was resigning for personal reasons, according to the letter he has sent to President Donald Trump. His resignation, which will be effective on October 13, is announced at a critical moment in the direction of monetary policy in the United States.
The president is deciding whether to renominate Janet Yellen as the Chair of the Federal Reserve, whose term expires at the end of January. Fischer’s resignation leaves one more vacancy to fill at the central bank and a greater opportunity for President Trump to re-shape U.S. monetary policy.
Fischer was born in Zimbabwe to Jewish parents, but later became a dual citizen of the United States and Israel and received a Ph.D. in economics from MIT. Between 2005 and 2013 he headed Israel’s central bank, with most observers giving him high marks. President Obama nominated him to the Board of Governors of the Federal Reserve system in 2014.
Fischer, like Yellen, is a strong advocate of preserving financial regulations adopted after the collapse of Lehman Brothers and subsequent financial crisis. Fischer was also seen as supportive of Yellen’s interest rate policies and, along with her, advocated for the most recent set of interest rate increases after the policy rate was set at essentially zero for an extended period of time.
“Stan’s keen insights, grounded in a lifetime of exemplary scholarship and public service, contributed invaluably to our monetary policy deliberations. He represented the Board internationally with distinction and led our efforts to foster financial stability,” said Chair Janet L. Yellen in a press release accompanying the announcement of Fischer’s resignation. “I’m personally grateful for his friendship and his service. We will miss his wise counsel, good humor, and dry wit.”
In his letter to President Trump, Fischer stated, “It has been a great privilege to serve on the Federal Reserve Board and, most especially, to work alongside Chair Yellen.
While waiting for Trump to define Yellen’s continuity, the focus is on the effect of Fischer’s exit in the course of monetary policy. Fed members are now struggling to understand why economic expansion and low unemployment are not generating higher levels of inflation.
The Federal Reserve decided in July to leave interest rates in a band between 1% and 1.25%. The market consensus indicates that the next increase will come as soon as December. The moderation in job growth during the month of August and the downward revisions in the previous months gives the Fed some latitude should they decide to take it.