Voting regional Fed presidents to turn slightly more dovish in 2019?

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1 Voting regional Fed presidents to turn slightly more dovish in 2019? Andreas Johnson US Economist, Fed Watcher Macro & FICC Research October 4, 2018

2 Contents The structure of the FOMC and voting Voting regional Fed presidents to turn slightly more dovish in 2019? Individual presentations of Bullard, Evans, George and Rosengren The Fed line-up in 2019

3 The structure of the FOMC and voting The FOMC normally has 12 voting members: - seven from the Board of Governors - the president of the Federal Reserve Bank of New York (permanent) - four of the 11 remaining regional Reserve Bank presidents (rotating) Board members are nominated by the US President and confirmed by the Senate Regional Fed presidents are designated by the Board of Governors The four rotating regional Fed presidents serve one-year terms as voting members The Board of Governors tend to be unified and rarely dissents over policy It is more common for the regional Fed presidents to dissent, creating some divergence in policy views 3

4 Voting regional Fed presidents to become more dovish? Regional Fed presidents voting in 2018: Barkin: Hawkish Bostic: Dovish Mester: Hawkish Williams: Hawkish: now President of New York Fed* continues to vote in 2019 * Mary Daly replaced John Williams as president of San Francisco Fed on Oct 1 and will vote at the November and December meetings. Esther George voted at the August and September meetings. Regional Fed presidents voting in 2019: Bullard: Evans: George: Rosengren: Dovish Neutral Hawkish Hawkish Arguably, voting regional Fed presidents will turn slightly more dovish in 2019 Bullard is likely to oppose rate hikes in 2019 but the other three should be happy about two or three hikes next year We are sticking to our forecast of Fed hikes in December, March and June 4

5 Federal Reserve Bank of St Louis President: James Bullard Took office: April 1, 2008 Dovish/hawkish bias: Dovish Focus on the neutral policy rate, inflation expectations and the yield curve Strong academic background, Ph.D. in Economics, numerous publications in professional journals 12 Sep: The flattening yield curve and subdued marketbased inflation expectations suggest that the current monetary policy stance is already neutral or possibly somewhat restrictive Miscellaneous: Named the 7 th most influential economist in the world in

6 Federal Reserve Bank of Chicago President: Charles Evans Took office: September 1, 2007 Dovish/hawkish bias: Neutral Focus on the effects of monetary policy on economic activity, inflation and financial market prices Strong academic background, Ph.D. in Economics, numerous publications in professional journals Sep 14: it is time to return to the more conventional, mainstream monetary policy Miscellaneous: In Dec 2012 the FOMC introduced the Evans rule according to which the fed funds rate would remain near zero until unemployment fell below 6.5% or inflation rose above 2.5%. 6

7 Federal Reserve Bank of Kansas City President: Esther George Took office: October 1, 2011 Dovish/hawkish bias: Hawkish Joined the Federal Reserve Bank of Kansas City in 1982 Focus on banking supervision and regulation Consistent supporter of interest rate increases Voted at the August and September meetings, covering for the vacancy in the San Francisco Fed presidency Aug 23: I think two more rate hikes this year could be appropriate Miscellaneous: Hosts the annual Jackson Hole Economic Symposium 7

8 Federal Reserve Bank of Boston President: Eric Rosengren Took office: July 23, 2007 Dovish/hawkish bias: Hawkish Joined the Federal Reserve Bank of Boston in 1985 Focus on macroeconomics, banking and how financial sector problems impact the real economy Strong academic background, Ph.D. in Economics, numerous publications in professional journals Sep 10: I don t see any reason why we wouldn t continue to gradually increase rates Miscellaneous: The grandson of a Swedish immigrant 8

9 The Fed line-up in 2019 Board of Governors: - Chairman: Powell - Other members: Brainard, Clarida, Quarles - currently three vacancies (October 4, 2018) New York Fed President: Williams Voting Regional Fed Presidents: Bullard, Evans, George, Rosengren Marvin Goodfriend and Michelle Bowman have been nominated by President Donald Trump to fill two of the vacancies on the Board of Governors but both need to pass a confirmation vote in the Senate 9

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