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December 18, 2015 at 07:38 AM
(Bloomberg) — The new year will usher in a fresh crop of Federal Open Market Committee voters, making it time for an updated breakdown of where policy makers stand as the focus shifts to the timing of the next interest rate increase.
The four votes that rotate among the reserve bank presidents — excluding New York, which has a permanent vote — will change hands in January, and appear slightly more hawk- heavy. The newcomers include three hawks and a dove and replace a hawk, a dove and two neutrals.
Of permanent voters, we’ve tweaked the scores for Governor Lael Brainard and New York Fed chief William Dudley. Those changes cancel each other out, however, and there’s no change for Chair Janet Yellen, by far the most important member.
Officials must weigh the timing of their next interest rate hike following liftoff on Wednesday that ended seven years of near-zero borrowing costs.
See also: Day 1 after liftoff: Fed move catapults money market rates
The next meeting is on Jan. 26-27, followed by an FOMC gathering on March 15-16 that will also be accompanied by a press conference. Investors see no chance of a move in January and a 42 percent probability of action in March, based on trading in federal fund futures.
We’ve also added tentative initial scores for Robert Kaplan and Patrick Harker, the new presidents in Dallas and Philadelphia. Stay tuned for a rating on the incoming Minneapolis head, Neel Kashkari, who takes over for uber-dove Narayana Kocherlakota on Jan. 1. None of those three new presidents will vote in 2016, but all will have a chance to air their views during FOMC meetings, influence voters and help shape policy statements.
The new voters will be Boston’s Eric Rosengren, Cleveland’s Loretta Mester, Kansas City’s Esther George and James Bullard from St. Louis. They replace John Williams from San Francisco, Chicago’s Charles Evans, Richmond’s Jeffrey Lacker and Atlanta’s Dennis Lockhart.
Bloomberg economics reporters applied a subjective ranking based on each member’s public record: A score of three doves indicates they’re most inclined toward an easy policy that favors job creation; three hawks show that they’re on the sharpest lookout for inflation and ready to tighten policy.
Chair Score: 1 dove Voting status: Permanent
The center of gravity on the FOMC, Yellen has so far proved to be the dovish chair that many expected. Still, just as predicted by economists who know her well, Yellen showed she’s wary of losing control of price stability and went ahead with a rate increase in December. She has worked hard to maintain consensus on the FOMC — her public diary shows that she calls each regional Fed president to canvass their views before every meeting — and she suffered just two dissents in 2015, both from Jeffrey Lacker. Her skill at maintaining consensus, however, will be tested in the new year, with doves on the Fed Board almost certain to clash with hawkish reserve bank presidents.
Vice chair Score: Neutral Voting status: Permanent
The elder statesman of the FOMC, Fischer is considered the second-most powerful member of the committee and a moderating influence on Yellen’s dovish tendencies. He has been closely in tune with the chair, and perhaps influential in with his counsel that inflation should move back toward the Fed’s goal in 2016. That said, his relative calm over market turmoil in August 2015 wasn’t enough to convince Yellen to move ahead with the first rate hike in September.
New York Fed President Score: 1 dove (change from 2 doves) Voting status: Permanent
Dudley is considered among the most influential members of the FOMC in his role as vice chairman of the committee and head of the regional Fed bank that oversees Wall Street. We’ve subtracted a dove now that Dudley followed through on support for a rate hike in 2015 even before seeing any tangible increase in inflation. While he remains highly sensitive to financial- market upsets, he seems determined to be a loyal vice chair and support the views of his boss.
Governor Score: 2 doves Voting Status: Permanent
Tarullo is the Fed Board’s key official on banking supervision and doesn’t speak about the economy very often. That said, he’s revealed himself in the last few months as being a strong dove, confirming the assumptions of Fed watchers. Specifically, he’s urged his colleagues to wait for “tangible evidence” of inflation before raising rates. He didn’t get his way, yet didn’t dissent in December. Count him among potential dissents every time the Fed hikes in 2016.
Governor Score: Neutral Voting status: Permanent
The lone Republican on the Fed Board, Powell has proved not quite as hawkish as some Fed watchers had expected. A former venture capitalist and Treasury Department official, he’s been very cautious in expressing his monetary-policy views. In early August, he said the “time is coming” for a rate increase, but he wanted to see more data to be sure. In the end, he voted with the chair in delaying in September and hiking in December, while also saying the Fed should move gradually with subsequent tightening.
Governor Score: 2 doves (change from 1 dove) Voting status: Permanent
Brainard, a former Treasury undersecretary for international affairs in the Obama administration, has established herself as the leading voice for doves urging caution in tightening monetary policy. She gave speeches in late 2015 arguing that weak global growth cast a shadow on economic prospects in the U.S. While her remarks were interpreted as a case against raising rates until 2016, Brainard voted for the hike in December. Along with Tarullo, she’s a candidate for casting the first dissent by a governor in more than 10 years.
Esther George
Kansas City Fed Fed President Score: 2 hawks Voting status: 2016 voter
George has consistently favored getting on with tightening policy, saying the Fed missed opportunities to raise rates in previous years. She has repeatedly warned the Fed could prompt asset-price bubbles with too-low interest rates. She dissented against the Fed’s accommodative policy at seven of eight Fed meetings in 2013, her last year as a voter. George could be a candidate for a few dissents in 2016 if the FOMC follows its members’ median forecast and raises rates four times.
