"the Fed said its first meeting of 2006 will take one day rather than two to avoid spanning the terms of two chairman. he Federal Open Market Committee will now meet on January 31, instead of gathering for two days, on January 31 and February 1, as it generally does in its first meeting of the year.For more reading on the three candidates jump to "AP boils down Greenspan succession to three names."
Greenspan's term ends January 31 and he has told associates that he would go on schedule.
But there has been persistent speculation that he might stay on longer, for instance if a replacement is not ready to take over in time.
"This schedule change avoids a meeting that spans the terms of two chairmen," the Federal Reserve said. It said Greenspan would attend the January 31 meeting.
The decision reinforces a sense among Fed watchers that the White House must work fast to find an heir to Greenspan, who commanded the Fed for 18 years with such skill that markets fret he could prove an impossible act to follow.
Three names lead the list of likely candidates to take over - Glenn Hubbard, a past adviser to President George W. Bush; Harvard economist Martin Feldstein; and former Fed Governor Ben Bernanke, who now is a White House adviser.
But no one has emerged as a clear front-runner and the White House may yet decide to select someone from Wall Street or industry, while Fed Governor Donald Kohn could prove the insiders' choice if Greenspan gets a big say.
Financial markets are naturally wary about a change in leadership at the U.S. central bank, particularly since it comes at a critical juncture for monetary policy.
The Fed has said it expects to continue a 15-month campaign of raising interest rates at a measured pace, although the devastation from Hurricane Katrina has some investors betting that it might pause after its next hike, at 3.75 percent.
Whatever the outcome of that debate, the first quarter of next year will be an even more crucial period than usual for the bank to plot and communicate its monetary policy path.
It is most interesting that Reuters names Fed governor Donald Kohn, pictured below, as Greenspan's favorite for his succession. Kohn is certainly a hawk who is aware that not all is as it seems in financial markets. Kohn addressed the financial sector in June with a bowl full of warnings that also contained the key note "when the unexpected inevitably happens."
Given the political pressure any new Fed chairman will have to fend off from the Bush administration he is my favourite too. Only problem - this administration will very probably choose a chairman it considers the most subservient to aid the political goals of the president. See the chair getting taken by the candidate who is willing to lip-synch the sounds from the White House.
With inflation on the rise, worsening growth expectations due to hurricane Katrina and the dollar beleaguered by the Euro in its role as the world's prime reserve currency the next chairman, who is appointed for 14 years, will have to fight an uphill battle from the very first day in office.
Uncertainty about the future course of the Fed is already reflected in the gold price which closed in on the $450-mark today. Acting chairman Greenspan counts gold, personal consumer expenditures (PCE) and productivity among his most important indicators for future inflation expectations. All three indicators have been pointing to an acceleration recently. Greenspan's successor will not be able to excuse an advancing devaluation of the greenback with the note that he was taken by surprise.
And don't forget: Every new Fed chairman was confronted with a crisis soon after he took office. Browse to "Greenspan's retirement could take longer than 257 days." As of today Greenspan has 144 days left.