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In their meeting last December, Federal Open Market Committee (FOMC) members oozed optimism as they not only raised their interest rate range as expected, but also upgraded their economic forecasts AND hinted at more rate hikes to come in 2018.

See, the Fed’s latest dot plot showed that at least 6 voting members are targeting a range of 2.00% – 2.25% in 2018, which is THREE interest rate hikes away from its current levels.

December Meeting's "Dot Plot"
December 2017’s Interest Rate “Dot Plot”

Thing is, not all of them are VOTING members. This means that who the voters are matters as much (or maybe more) than the median of the members’ estimates.

So, does the Fed’s current list of voters have enough hawkish voices in their midst this year? Here’s a quick 411.

Who votes on the policy changes anyway?

The Federal Open Market Committee (FOMC) has 12 members:

  • 7 Board of Governors of the Federal Reserve System;
  • The president of the Federal Reserve Bank of New York; and
  • 4 of the 11 regional Reserve Bank presidents.

The Board of Governors, Chair, Vice Chair, and President of the New York branch ALWAYS get to vote, while regional Fed Presidents rotate each year.

Non-voting Reserve Bank presidents attend the meetings of the Committee, participate in the discussions, and contribute to the Committee’s assessment of the economy and policy options.

The rotating seats are filled from the following four groups of Banks, one Bank president from each group:

  • Boston, Philadelphia, and Richmond
  • Cleveland and Chicago
  • Atlanta, St. Louis, and Dallas
  • Minneapolis, Kansas City, and San Francisco

Who’s in and who’s out?

Fed Chairman Janet Yellen will be replaced by Governor Jerome Powell in February, while New York Fed President Dudley is expected to retire in mid-2018. This will leave the Board with 4 members out of the 7 available slots until Dudley officially retires and ups the vacancies to 4.

Out of the regional Presidents, Mester (Cleveland), Barkin (Richmond), Bostic (Atlanta), and Williams (San Francisco) will have voting power this year.

Meanwhile, committee members Evans (Chicago), Rosengren (Boston), Bullard (St. Louis), and George (Kansas City) will still get to sit at the cool table but NOT get to vote on policy changes. They’ll still likely put in their two cents in committee discussions, though.

Can’t wrap your head around the new team? Here’s a neat cheat sheet (hey, it rhymes!) for ya!

Oh, and take note that we’re assuming that Yellen has already stepped down:

From the list above, it looks like the hawks will be in control of the group this year. While incoming Fed Chair Powell and New York’s Dudley will likely continue Yellen’s pace of cautious tightening, we also know that Williams, Bostic, and Mester see around 3-4 rate hikes until December. Brainard will likely be more dovish than hawkish, however, while Quarles and Barkin have yet to show their dovish/hawkish feathers.

Take note that there are only 8 (out of 12) voting members listed above. Dudley will also step out by mid-year while Richmond has yet to choose a permanent President. This means that Donald Trump can still appoint at least four new FOMC members including Powell’s Vice Chairman.

So unless Trump chooses uber doves for the vacant seats, it’s likely that the hawks will be in control of the group this year.

Question is, will they be hawkish enough to raise interest rates THREE times as the December meeting minutes suggested? Or will economic circumstances force them to dial down their hawkishness?