San Francisco Fed's Williams Is N.Y. Fed Frontrunner, WSJ Says

(Bloomberg) -- Federal Reserve Bank of San Francisco President John Williams is the leading candidate to replace William Dudley as head of the New York Fed, the Wall Street Journal reported.

Williams, 55, has led the Fed's 12th district bank since 2011, when he took the reins from Janet Yellen, who ultimately went on to become Fed chair before stepping down Feb. 3 after four years at the helm. He's a career Fed policy maker and economist, though he's also lectured at Stanford University and served as a senior economist on President Bill Clinton's Council of Economic Advisers.

Dudley, 65, has said he plans to step down by mid-year. The New York Fed presidency, which has a permanent vote on the policy-setting Federal Open Market Committee, is considered one of the three most powerful positions in the U.S. central bank because of its close oversight of and interaction with financial markets and Wall Street firms.

The Wall Street Journal sourced its report on Saturday to people familiar with the matter and gave no further details. A spokesman for the New York Fed declined to comment, as did a spokesman for the Fed Board in Washington.

Earlier this month, New York Fed directors said they had narrowed their search for the bank's next president to a “handful of final candidates,” without naming any of those still in the running or the timetable for announcing their selection.

Diversity Push

While his resume includes many of the qualifications for the job, Williams' possible shift to New York might draw criticism about the lack of gender and racial diversity in the upper ranks of the Fed.

Members of the Fed's Washington-based board of governors are nominated by the president and confirmed by the Senate. The 12 regional bank chiefs are chosen by non-banking directors of their respective boards and then are subject to approval by Fed governors.

Generally considered a moderate on monetary policy, Williams has indicated support for three or four rate hikes this year. He has been urging his colleagues and his profession to start rethinking the Fed's inflation target in an era of historically low interest rates, and has spoken positively about price-level targeting -- a policy where the central bank aims to achieve an inflation rate on average over time, tolerating equal overshoots and undershoots.

Williams, together with Fed Board economist Thomas Laubach, has written a series of studies on the neutral interest rate -- which he refers to, often and affectionately, as r-star. His recent research has suggested that across advanced economies, the level of central bank interest rates that neither stoke nor slow growth have fallen, leaving monetary authorities less crisis-fighting ammunition.

Williams has a good working relationship with Fed Chairman Jerome Powell, whom President Donald Trump nominated to replace Yellen. Williams is also known as a colorful character who delivers speeches containing Green Day lyrics and talks often about his video game habit.

To contact the reporter on this story: Jeanna Smialek in New York at jsmialek1@bloomberg.net.

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Alister Bull

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