2018 FOMC Voters More Hawkish Than 2017 Voters

Once Chairman Powell is sworn in (expected to be February 4, 2018, after the January meeting), Yellen won’t remain on the FOMC. 

Unless Goodfriend and additional Governors are confirmed soon, there will only be three Governors left in  February, which would make it harder to run the Fed. This also means that two governors would constitute a quorum, triggering Sunshine Act disclosure. This would imply slower institutional initiatives. 

Despite our usual disclaimer that nonvoters also matter greatly, below are our very rough thoughts on the 2018  voter lineup. The 2018 voters lean slightly hawkish; regional Fed presidents more definitively so than Board governors.  

FOMC Voter Rotations: 

(*awaiting  nomination/confirmation)2017 2018 Rate Risk  (+ means more  hawkish)
Chair Yellen (through January) Powell (from February) =
*Vice Chairman (vacant) *(El-Erian / Lindsey / Williams?)=
VC Supervision Quarles Quarles =
Governor Brainard Brainard =
*Governor Powell *Goodfriend +
*Community Bank Gov. (vacant) *(Bowman?) =
*Governor (vacant) *(Trump pick) +
*NY Fed President Dudley *(Midyear switch) =
FRB President 1 Evans Mester +
FRB President 2 Harker Barkin +
FRB President 3 Kaplan Bostic 
FRB President 4 Kashkari Williams (to Vice Chair?) +

A couple of the shifts in Reserve Bank President voters warrant further explanation. 

Harker to Barkin: Hawkish Shift 

Harker expressed more concern over the slow progress of inflation toward 2 percent: “I’m more guarded in my view about the path of inflation than I am about economic activity…For that reason…I see two rate  increases as the likely appropriate path for 2018.” In contrast, we expect incoming Richmond Fed President  Barkin likely to express a view as least as hawkish as the median point of view. 

Kaplan to Bostic: Dovish Shift 

Recently, Kaplan has been concerned about the so-called “catch-up” risk, which would place him on the hawkish side of the center: “We are already at or near full employment now. I believe we’re going to overshoot full employment in the next year…The degree of the overshoot is such my concern is that if we wait too long to  remove inflation, we’re going to be playing catch-up.” He also saw the fiscal reforms as creating a “short 

term bump” but also higher leverage. On the other hand, Bostic was less convinced of a general trend of  more-robust inflation and appeared to want to await more evidence before committing to a stronger pace of  rate hikes: “Given where we are and what I am expecting, I would say two to three.” 

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