A Guide to Federal Reserve Policymakers

Posted May 21, 2012 by CLeahey

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• The Federal Reserve policymakers include 7 Fed governors and 12 regional bank presidents on the FOMC.
• Now that the 2 positions vacant have been filled, the FOMC is back to a full complement of board members, the first time since 2006.  But Duke, a Bush nominee, may leave soon since she has not been formally reappointed.
• With so many new and relatively inexperienced members, the chances for policy surprises and mistakes increase.  The chairman (who controls the huge research staff) and key members of that staff become increasingly important.
• The core dovish influential gang of three (Bernanke, Dudley and Yellen) remains in control and should find more support from the four new voters in 2012.  One is a suspected dove (Williams) and two have been centrists (Lockhart and Pianalto).  Of the hawkish gang of four (Fisher, Kocherlakota, Lacker, and Plosser), only Lacker votes this year, down from three in 2011.  The number falls to zero in 2013.
• So the FOMC is taking on a more dovish tilt, not counting Obama’s latest nominees.  This could be problematic when inflation finally is an issue or if assets prices appear to be “bubbly.”
• The Fed’s new communication policy this year includes individual FOMC member forecasts of the policy rate path.  This has already led to some confusion among investors.  While the one page policy statement indicates that policy rates will be kept low until the end of 2014, 13 members expect rates to have risen by that date, with the average expectation around 1%.  Seven members think the funds rate will be 2% or higher by the end of 2014.  So “low for long” does not mean unchanged.

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