The potential nomination of a Federal Reserve outsider reportedly made investors wary. In a Bloomberg report, the New York-based business news site noted that former secretary of US Department of Treasury Lawrence Summers' possible nomination in the Federal Reserve made investors scramble for advice on whether the news would affect financial markets and monetary policy.
Talks within industry circles earlier assured that Federal Reserve Vice Chairman Janet Yellen was a shoo-in for the Fed chairman nomination. BNY Mellon Wealth Management Chief investment officer Leo Grohowski rounded out investor sentiment and said, "The market was comfortable with a Yellen appointment and is needing to grow comfortable with what a Larry Summers appointment might mean." "It's one of the uncertainty factors that the market has to deal with that many, a few months ago, didn't think we had to deal with," he added.
The report also alluded investor uncertainty at Summer's possible appointment to the fact that the former secretary has not made any monetary policy. Also, Summer earlier expressed that he is not convinced about the quantitative easing (QE) proposed by current Fed chairman Ben Bernanke in an April economic conference.
Bernanke would be ending his term in January of next year. The new chairman would be left with implementing QE measures. One of those measures was the reduction of monthly bond purchases of USD85 million. The reduced bond purchase has affected financial markets in New York and in cities as far as Jakarta. The bond purchase reduction had also increased interest rates on mortgages and Treasury debt.
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