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The connection between tall Fed chiefs and interest rates

Maybe we’re all just overthinking it when it comes to figuring out where interest rates are headed over the long term.

Instead of parsing through data on unemployment, inflation and productivity, rather than scouring for the hidden meaning behind every little turn of a phrase in the post-Fed meeting statements, and in lieu of the debate between rules-based and data-driven policy, we could just look at one thing: a height chart.

After all, there’s pretty clear evidence —wink wink — to suggest that over the past almost 40 years of monetary policy, the path of rates has had a near-perfect correlation with the physical stature of the Federal Reserve chair.

Take “Tall Paul” Volcker for instance. The 6-foot 7-inch former central banker and inflation slayer oversaw the surge of the Fed’s benchmark funds rate from an average 11.2 percent in 1979 all the way to 20 percent by mid-1981.

Conversely, the more average-sized 5-foot 8-inch Ben Bernanke yanked the funds rate from 5.25 percent in June 2006 down to near-zero by the end of 2008, a level where it stayed until December 2015.

Don’t believe in the height-interest rate connection? LPL Financial puts it in graphic form:

That fellow depicted on the right is current Fed Governor Jerome “Jay” Powell, who most observers believe is the odds-on favorite to take over for the diminutive Janet Yellen, to his right.

Yellen is just five-foot three inches, though it’s worth nothing that rates actually have climbed a full percentage point during her tenure. So maybe the correlation isn’t quite perfect.

“President Trump’s choice for Fed chair will no doubt be important, both on its own merits and as a signal of future picks,” LPL said in a note. “The chair role is the public face of the central bank, and by a strange coincidence the height of the Fed chair over time has tended to foretell the direction of interest rates. Joking aside, the chair is a very important position and is one of the most influential voices in monetary policy decisions.”

The coincidental indicator is likely to be proven true no matter who Trump nominates when Yellen’s term expires in February. Markets believe the Fed is almost certain to raise its rate a quarter-point in December — possibly the last hike before Yellen leaves office — then to move two or three times in each of the next two years.

In addition to Yellen and Powell, Trump is said to be considering Stanford economist John Taylor, former Fed Governor Kevin Warsh and current chief White House economic advisor Gary Cohn.

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