This document is being provided publicly in the following form. Please subscribe to FSInsight.com for more. Members Area Fed Watch Fight Brewing Over Trump New Fed Nominee Judy Shelton Fed Watch Fight Brewing Over Trump New Fed Nominee Judy Shelton February 7, 2020 Vito J. Racanelli SENIOR EDITOR & MARKET INTELLIGENCE ANALYST Just when you thought it would be a quiet time for the Federal Reserve, with the Fed Open Market Committee set to keep rates stable for a while, President Donald Trump stirs things up again. I’m referring to his recent nomination of economist Judy Shelton to the Fed’s board of governors. A recent Wall Street Journal story said it could turn on how she explains to lawmakers her heterodox views on policy issues including central-bank independence, interest rates and the gold standard. He also nominated St. Louis Fed economist Christopher Waller. Shelton, once U.S. envoy to the European Bank for Reconstruction and Development and an informal Trump advisor to his 2016 campaign, has pushed for returning to some kind of gold standard, a relatively unorthodox view among economists. Shelton appears to be somewhat lukewarm on Fed’s independence from the executive branch and defended Mr. Trump’s call for lower interest rates, reversing her years of calls for higher rates, the WSJ reported. Both these ideas could be hard to get by her Senate confirmation. She has appeared to flip-flop on rates, being against moves to lower rates when Barack Obama was president but now in favor of Trump’s call for lower rates. Hmmm. Separately, the U.S. Treasury Dept. last week provided details about plans to auction 20-year bonds in the first half of 2020. They will be issued each quarter, in February, May, August and November. The government didn’t say when the first would be issued or the size. Remember, the Treasury had broached the subject of selling 50-year and 100-year bonds but the demand doesn’t seem to be there. The government spent $1.02 trillion more in 2019 than it took in, the Treasury said last month, the highest calendar-year deficit in seven years. I’ll add that’s not particularly auspicious for future generations. The NY Fed continues to add tens of billions of dollars in temporary liquidity to financial markets, through overnight repurchase agreements, or repo, and 14-day repo intervention. As a result, since September the Fed’s has risen back to $4.2 trillion from $3.8 trillion. The CME Fed futures market, historically a good indicator of rate trends, puts a 53% rate change probability (reduction) in July. The U.S. Treasury 10-yr note yield was around 1.58%, up from 1.51% last week. Upcoming: 3/17-18 – FOMC meeting. No action expected. Vito J. Racanelli SENIOR EDITOR & MARKET INTELLIGENCE ANALYST Disclosures (show).