The Big Picture
There are twelve voting members on the Federal Open Market Committee (FOMC): the seven members of the Board of Governors and five of the twelve Federal Reserve Bank presidents. The members of the Board of Governors are nominated by the President of the United States and are confirmed by the Senate.
The president of the Federal Reserve Bank of New York has a permanent vote on the committee, so the remaining four presidents with a vote rotate annually. They serve one-year terms beginning January 1 each year.
Other Federal Reserve bank presidents attend the FOMC meetings and contribute to the discussions, but they do not cast a vote for setting policy.
The Lineup
Whose names will you be hearing a lot throughout 2025? The seven governors are Jerome Powell (Chairman), Michael Barr, Michelle Bowman, Lisa Cook, Philip Jefferson, Adriana Kugler, and Christopher Waller.
Fed governors typically vote in unison with the Fed Chair. Fed Governor Bowman, however, shocked the world with a dissenting vote at the September FOMC meeting, preferring a smaller 25-basis points rate cut. That was the first dissent by a Fed Governor since 2005. If there is going to be dissension in the ranks, it usually originates among the voting Federal Reserve Bank presidents.
The names you'll want to be closely acquainted with in that realm include John Williams (New York), Austan Goolsbee (Chicago), Susan Collins (Boston), Alberto Musalem (St. Louis), and Jeffrey Schmid (Kansas City).
Each FOMC member would acknowledge that they are data dependent for their interest rate position, yet the market makes a living out of reading between their speech lines when thinking about what the FOMC will do with monetary policy.
Below we feature excerpts from recent speeches/interviews from the FOMC presidents rotating into a voting position (emphasis our own) to provide some flavor for their perceived policy tilt.
Austan Goolsbee
- In a December 3, 2024, keynote conversation moderated by Crain's Chicago Business Editor in Chief:
"I don't view the economy as perfect by any means. The strongest thing we've had going in the economy has been the job market. And the weakest thing in the economy by far has been the prices... You're never going to hear me or any other economist say tariffs are good.... Tariffs raise prices."
- In a November 21, 2024, Q&A at the Central Indiana Corporate Partnership:
"My view is that the long arc over the last year and a half shows inflation is way down and on its way to 2 percent. Labor markets have cooled to something close to stable full employment. Things are getting close to where we want to settle on both counts. It follows that we will probably need to move rates to where we think they should settle, too. We don’t need to get to that place immediately, but if we look out over the next year or so, it feels to me like rates will end up a fair bit lower than where they are today.
That’s my view of the general path ahead. But when there’s uncertainty or disagreement about where rates will eventually settle, it may make sense to slow the pace of rate cuts as we get close."
Susan Collins
- In a November 20, 2024, speech: Perspectives on the Economy and Monetary Policy
"I expect additional adjustments will likely be appropriate over time, to move the policy rate gradually from its current restrictive stance back into a more neutral range. However, policy is not on a pre-set path. The FOMC will need to make decisions meeting-by-meeting, based on the data available at the time and their implications for the economic outlook and the evolving balance of risks... While the final destination is uncertain, I believe some additional policy easing is needed, as policy currently remains at least somewhat restrictive...
The intent is not to ease too quickly or too much, hindering the disinflation progress to date. At the same time, easing too slowly or too little could unnecessarily weaken the labor market... All told, I see the risks to my quite favorable baseline outlook as roughly in balance. Inflation is returning sustainably, if unevenly, to 2 percent, and to date, labor market conditions are healthy overall. Policy is well-positioned to deal with two-sided risks and achieve our dual mandate goals in a reasonable amount of time. The policy adjustments made so far enable the FOMC to be careful and deliberate going forward, taking the time to holistically assess implications of the available data for the outlook and the associated balance of risks."
Alberto Musalem
- In a December 4, 2024, appearance at the Bloomberg and Global Interdependence Center Symposium: Remarks on the U.S. Economy and Monetary Policy:
"I expect that inflation will converge to the FOMC’s 2% target and that additional easing of moderately restrictive policy toward neutral will be appropriate over time. Along this baseline path, it seems important to maintain policy optionality, and the time may be approaching to consider slowing the pace of interest rate reductions, or pausing, to carefully assess the current economic environment, incoming information and evolving outlook.
I favor a patient approach that focuses on returning inflation sustainably to 2% for several reasons: In the current environment, core PCE inflation is above target, the economy is strong and growing above its long-term potential, and the labor market is consistent with full employment. Also, the balance of risks around the price stability and maximum employment goals has shifted, and there is uncertainty about the neutral policy rate and productivity trends."
Jeffrey Schmid
- In a November 19, 2024, speech: Longer-Term Considerations for Growth and Monetary Policy
The decision to lower rates is an acknowledgement of the Committee’s growing confidence that inflation is on a path to reach the Fed’s 2% objective—a confidence based in part on signs that both labor and product markets have come into better balance in recent months. While now is the time to begin dialing back the restrictiveness of monetary policy, it remains to be seen how much further interest rates will decline or where they might eventually settle.
I have discussed three long-term trends today: productivity, demographics, and debt. All three have implications for the long-run path of monetary policy, interest rates, and growth, but in different directions. Faster productivity growth could lead to relatively high interest rates and high growth; demographic trends point to low interest rates and slow growth; while debt dynamics suggest a combination of high interest rates and slow growth. All three factors are likely to be in effect, and the outcome for interest rates and the economy will be determined by the balance between them. As an optimist, my hope is that productivity growth can outrun both demographics and debt. But as a central banker, I will not let my enthusiasm get ahead of the data or my commitment to the Fed’s dual mandate of price stability and full employment."
What It All Means
The newcomers to the FOMC in 2025 are largely aligned in their thinking, which is that they seem to believe more easing is needed but that the Fed can afford to be more deliberate in removing policy restraint. In sum, we would categorize this presidential grouping as being more dovish-minded than hawkish-minded.
Of course, their policy leaning is based on what they know in more current terms. That could change if future data show inflation heating up since they are also aligned with the Fed's overarching view that policy is not on a preset course and that the risks to achieving the Fed's dual mandate of maximum employment and price stability are roughly in balance.
That is a helpful perspective for Fed Chair Powell who works intently on building a consensus at the Fed, as he won't have to start the new year anyway with some real "troublemakers" in the voting presidential mix. We jest with that description, but it can be said that none of the incoming presidents for the 2025 FOMC sound as if they are going to run strong interference with Fed Chair Powell's aim of building consensus.
They'll have their first vote at the January 28-29 FOMC meeting, but it won't be their first FOMC rodeo. They've already been in the room where it happens. The difference now is that they are the ones who will directly make monetary policy moves happen. That is why their thoughts will carry more weight with the market in the coming year.
