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Number two at US Federal Reserve to step down

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Washington (AFP)

Stanley Fischer, the vice chairman of the Federal Reserve, announced Wednesday he will retire next month, creating a third vacancy for President Donald Trump to fill at the US central bank.

The 73-year-old will step down on October 13, nearly a year before his term as vice chair was due to expire and two and a half years before the end of his term on the Fed's board of governors, the Fed said in a statement.

Fischer, a former governor of the Bank of Israel and vice chairman of Citigroup, leaves the Fed at a critical time, with the central bank confronting a deepening dilemma in US monetary policy and preparing to end a multi-trillion-dollar stimulus program put in place after the 2008 global financial crisis.

Fischer also departs amid White House plans to roll back post-crisis financial safeguards, which Fischer and other current and former Fed governors have strongly defended.

In a brief letter of resignation, Fischer said he was stepping down for unspecified "personal reasons" and cited the central bank's work to stabilize the financial system following the crisis as an accomplishment.

"During my time on the board, the economy has continued to strengthen, providing millions of additional jobs for working Americans," wrote Fischer, who was appointed by former President Barack Obama in 2014.

The Fed has pursued forceful banking regulation in the wake of crisis, imposing fines and subjecting financial institutions to stress-testing to protect them against future economic shocks and improve their capital foundations -- measures that have drawn push-back from industry.

By February, Trump will have had the opportunity to name five of seven board members.

Trump in July chose the investor and former Treasury Department official Randal Quarles to join the Fed as vice chair for supervision in a further sign the White House may promote continuing deregulation of the financial sector. A preliminary Senate vote on Quarles's nomination is expected this week.

- A critical moment -

Trump has said he is also weighing whether to name his current senior economic advisor Gary Cohn as Fed chair, replacing Janet Yellen, whom he has also said he may keep in place.

Yellen's term as chair ends in February but she is not due to leave the Fed's Board of Governors until 2024.

In a speech last month, Yellen delivered a forceful defense of Wall Street reforms put in place after the crisis, widely seen as a direct contradiction of Trump's position which could cause her to lose favor in the White House.

However, Cohn also recently delivered a public rebuke of Trump, criticizing the president's response to deadly violence by white supremacists at a rally last month in Virginia.

Former Board of Governors member Daniel Tarullo stepped down in April.

Fed policymakers have twice raised rates in 2017 but a third rate hike this year is seen as increasingly unlikely because inflation has failed to rise despite persistent job growth, leaving Fed members increasingly divided on the near-term need to tighten interest rates.

As soon as this month, the Fed could announce a start date for winding down the "quantitative easing" program put in place after the crisis and which built up a $4.5 trillion portfolio of government-backed assets to inject cash into financial markets.

By tightening the money supply, the move could be tantamount to an interest rate increase, leaving investors eagerly awaiting details.

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