Every year, there is a rotation among the Fed members who have the right to vote in the Committee on operations on the open market. This process is closely monitored by traders, as the strengthening of the "dovish" or "hawkish" wing, which as a rule influences the determination of the voiced rhetoric. In the context of evaluating the prospects of monetary policy, this circumstance is important, especially now that the question of raising interest rates was practically hung in the air. Of course, the position of the members of the Federal Reserve may change depending on external circumstances - but still, nobody canceled the "personal factor". Therefore, I propose to consider each of them.
First of all, it should be noted that the composition of the Governing Council, which has a permanent right to vote, has not changed. They are Fed Chairman Jerome Powell, John Williams, Lael Brainard, Richard Clarida, Randal Quarles, and Michelle Bowman. None of them resigned, so they continue to fulfill their duties within the framework of their 14-year term. But as for the "newcomers", their faces are also well known to us despite the fact that last year they did not have the right to vote at the Fed. These regulators often spoke on a public plane, assessing certain events. As a rule, their rhetoric had little influence on the market, since they did not directly participate in the formation of monetary policy, but merely commented on the current situation. They were considered only as a source of information regarding the general sentiment in the Fed. But since January 30, when the first meeting of the Fed will take place this year, these officials will have the right to vote, after which their word will be "worth its weight in gold." So who are we talking about?
Hence, in the coming year, Committee members who have the right to vote in the Fed will be Charles Evans (FRB Chicago), Eric Rosengren (FRB of Boston), James Bullard (FRB of St. Louis) and Esther George (FRB of Kansas City). In turn, the following members of the regulator are deprived of the right to vote namely, Loretta J. Mester (Cleveland), Mary C. Daley (San Francisco), Raphael W. Bostic (Atlanta) and Thomas Barkin (Richmond).
What do we know about the position of those who gained the right to vote in the Fed format in 2019? For example, the head of the Federal Reserve Bank of Chicago, Charles Evans, has always been considered the representative of the "dovish" wing. But last fall, he made an unexpected statement that the regulator should increase interest rates above the neutral level in order to "keep the economy on the path of sustainable growth and inflation in the area of the target mark". In early December, he again stated his opinion saying, "the time has come to bring monetary policy to neutral, as current data emphasizes the strength of the US economy." Given this rhetoric, it cannot be attributed to the "dovish", although he has not yet voiced his position after a series of negative American releases.
But in the situation with James Bullard, who heads the Federal Reserve Bank of St. Louis, the situation is reversed. For a long time, he defended a fairly tough position, consistently advocating a gradual (but sure) increase in interest rates. However last summer, he unexpectedly urged the Fed to stop tightening monetary policy. He explained his opinion for several reasons. First, it is the weakening of the inflationary pressure, and secondly, the inversion of the yield curve. According to him, the Fed should not act "ahead of the curve" as this can aggravate the already difficult situation. It is worth noting that since the US inflation has further slowed down, it is unlikely that he revised his position in the direction of tightening.
Another member of the Fed, who has the right to vote this year, Eric Rosengren, is a supporter of a tight monetary policy. In his opinion, the process of raising interest rates is a form of insurance against overheating of the American economy. Back in 2013, he advocated an early reduction in incentives, and on the eve of 2018, he said it was necessary to raise the rate four times. But in each case, he appealed to the increase in price pressure in the country, whereas now, the reverse process is observed. Therefore, Rosengren may also reconsider his opinion. Although of all the above, he is the most ardent supporter of the hawkish position.
Well finally, Esther George, who heads the Federal Reserve Bank of Kansas City, (Personally, I remember it as a phrase voiced in 2016) says, it is better for the regulator to raise the rates earlier than later". This phrase amply describes its position regarding the prospects of monetary policy. In addition, Esther George last year made a public statement to the president of the United States, reminding him of the independence of the American Central Bank. At the same time, he confirmed the Fed's plans to raise the discount rate twice this year. Back in summer, a statement was made. But here it should be noted that it has taken a more moderate position recently. According to her, the rate can "go up to three percent" with time, but she also does not see the need to accelerate the pace of its increase.
Thus, the "recruits" in the ranks of the voters are unlikely to change the overall mood of the regulator. As you can see, yesterday's "dovish" tightened their rhetoric while the recent "hawks" are fighting for the suspension of monetary policy tightening. All these suggest that the Fed will make situational decisions in 2019 based on the dynamics of key macroeconomic indicators.
