The market is fickle. It has jumped from one candidate to another as the most likely Fed Chair. Until his belated and mild criticism of the President dealing with race issues, economic adviser Cohn was regarded as the most likely successor to Yellen at the head of the Fed.  

When Cohn fell out of favor, it was seen as a contest between Yellen and former Fed Governor Warsh. Powell’s stock rose recently, and there have been reports that Treasury Secretary Mnuchin favors him. Yellen had slipped in the betting markets, as president-as-disrupter has little time for tradition or the fact that Yellen has steered the Fed quite remarkably through tapering, rate hike and now balance sheet reduction with very little drama. Today she has moved back into second place behind Powell. 

Yesterday, reports suggesting that Trump was enthusiastic after meeting with Taylor saw his stock rise in the betting websites and may have prompted a reversal in the yields. The US 10-year yield closed higher, and the December futures contract surrendered the gains scored in the wake of the disappointing CPI report before the weekend. The 2-10 curve did not change; yields rose nearly uniformly by three basis points. We caution against reading too much into the process whereby Trump meets the different candidates for the post that his staff has identified. Also, although the Taylor rule would suggest higher rates may be appropriate, Taylor himself is opposed to blindly following any model.Nevertheless, many see Taylor as being more hawkish than Yellen or Powell.  

PredictIt has Powell as the most likely nominee, with a little more a one-in-three chance.A week ago, his chances were even-money.The new new thing is that Taylor.His odds improved to improved to one-in-five from one-in-ten yesterday, but have eased back to about one-in-sixIt is pretty much a dead heat between Taylor and Warsh, with Yellen in second with a one-in-five chance.  

Bank of England Governor Carney testified today, affirming that a rate hike may be appropriate in the coming months. He did not seem to break any new ground in his first testimony before Parliament’s Treasury Select Committee since the June election. Carney did acknowledge that inflation is close to a peak, which is why many participants were did not anticipate the hawkish turn by the MPC. In early September, a Bloomberg survey found a little more than 20% of its survey respondents expected a hike this year. Now full three-quarters do.