2019-2020 Fomc Voting Members:Their Voices

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2019-2020 FOMC VOTING MEMBERS: THEIR VOICES

By Maeve O’Brien The Fed is expected to hold rates steady in 2020 and voting member turnover should not bring a large overall Looking at a big picture view of voting turnover in the 2020 FOMC, it seems as though there are two hawks shift to policy direction. 2019 alternates Harker, Kaplan, Kashkari, and Mester will replace outgoing Bullard, Evans, replacing two hawks, one dove replacing one dove, and one centrist replacing one centrist. However, while there George, and Rosengren as 2020 voters. The Board of Governors and NY Fed President Williams are always voting appears to be a one-to-one replacement for each non-returning voting member based on policy leanings, the new members of the FOMC. These returning members are mostly centrist with some dovish leanings by Governor dynamic of the FOMC voting members will depend on marginal differences in opinions amongst the new voters. Brainard. Note that there remain two vacancies on the Board. Judy Shelton and Christopher Waller were named Will Mester be as hawkish as Rosengren? Will Kaplan remain centrist or will he begin to lean slightly hawkish? by President Trump but have not been formally nominated. Both are considered to be very dovish. Only time will tell but we should get our first clues at the next FOMC meeting January 29.

DOVE HAWK

JAMES BULLARD: JOHN WILLIAMS: ROBERT KAPLAN: LORETTA MESTER: Non-returning voting member 2019 Returning voting member 2019 Incoming voting member 2020 Incoming voting member 2020 (dissented on Sept 2019 rate cut in favor of a larger rate cut) “The economy is in a good place, and monetary policy is as well… Of “Do we act now or do we let this situation breathe a little bit more (opposed past 3 rate cuts in favor of holding rates steady) “The bottom line is that U.S. monetary policy is considerably course, things can change. Data dependency remains our motto, and – understand that we could take action in December or some “I wasn’t a supporter (of rate cuts) but it was a close call. I certainly more accommodative today than it was as of late last year.’’1 if there were a material change to this outlook, we would adjust future day. So that’s the reason it was a close call (to support the understood the arguments for why it made sense to move the rate 6 12 “The FOMC’s adjustment toward lower rates in the face of monetary policy.” October rate cut).” down. But now I think we’re in a really good spot... I don’t view the trade policy uncertainty may help facilitate somewhat faster “With the adjustments we’ve already made, lowering interest rates, “It (US economic growth) gets worse if we don’t make some policy current readings on inflation expectations as being problematic, 18 growth in 2020 than what might otherwise occur.”1 we’ve got the economy on a very strong footing, sustainable footing, changes. We think over the next five or 10 years it’s going to I view them as being relatively stable.” for good growth next year… I expect inflation to move up, with that slowly decline… I think policy is in the right place right now.”13 “We’re in a good spot right now to wait and see where inflation’s strong economy.”7 going and where the labor market and growth are going before we make another change in policy.”19 NEEL KASHKARI: Incoming voting member 2020 JEROME POWELL: RICHARD CLARIDA: Returning voting member 2019 “My message is clear, we should be supporting the Returning voting member 2019 ESTHER GEORGE: economy, not tapping the brakes (on monetary policy)… “Monetary policy is now well positioned… If the outlook changes Non-returning voting member 2019 how much more do we have to cut, I don’t know yet.”2 “We have the strongest labor market in 50 years… We have low and materially, policy will change as well. At this point in the long stable inflation. We have solid growth, and our baseline outlook for the expansion, I see the glass as much more than half full.”14 (dissented on past 3 rate cuts in favor of holding rates steady) “We’ve been undershooting inflation for basically six or eight economy is more of the same in 2020.”8 years so why don’t we commit not to raise rates until we “Our existing framework has served us well. Nonetheless, the “Supporting an unchanged policy rate in recent meetings does not actually achieve that (higher inflation).”3 “The consumer has never been in better shape in my professional career current low interest rate environment may limit the ability of ignore the downside risks facing our economy. The emergence of in aggregate.”8 monetary policy to support the economy… In a downturn, it those key risks to the outlook as early as the fourth quarter of 2018 “My own outlook for the economy is one of continued growth would also be important for fiscal policy to support the economy. caused me to moderate my expectation that further rate increases but somewhat cautious growth going forward, because “We were just doing textbook monetary policy to provide some support However.. the federal budget is on an unsustainable path.”15 were needed… I shifted downward my view of the appropriate there are some risks on the horizon.”4 for the economy in the face of this global slowdown and muted path for policy over the next one to two years... I view this as an 8 inflation pressures.” “A significant move up in inflation that’s also persistent before appropriate adjustment.”20 raising rates to address inflation concerns: That’s my view.”16 LAEL BRAINARD: Returning voting member 2019 CHARLES EVANS: ERIC ROSENGREN: Non-returning voting member 2019 PATRICK HARKER: Non-returning voting member 2019 “It may be helpful to specify that policy aims to achieve Incoming voting member 2020 inflation outcomes that average 2 percent over time or over “So the economy is in a good place, and I think we’ve made good adjust- (dissented on past 3 rate cuts in favor of holding rates steady) (opposed past 2 rate cuts in favor of holding rates steady) the cycle. Given the persistent shortfall of inflation from ments to the stance monetary policy. So cutting the funds rate target by “I view the U.S. economy as in pretty good shape right now… The its target over recent years, this would imply supporting 75 basis points – three cuts, as you mentioned. I think that puts us in a “My own view is that we should hold steady for a while and watch U.S. economy is in good enough shape that I dissented at the last 9 inflation a bit above 2 percent for some time to compensate good place.” how things unfold before taking any more action… I held this meeting… I did not think the last cut was necessary, and I certainly 5 for the period of underperformance.” “Policy is not that far off neutral, I would say it’s accommodative.”10 same view regarding the last two cuts. And while it wasn’t my think that there is nothing that has come in since that meeting that “I will be watching the data carefully for signs of a material preference, it does act as a good reminder that monetary policy would change my view.”21 in the United States is a deliberative process.”17 change to the outlook that could prompt me to reassess the “I don’t think there’s a big cost to being a little below 2% (inflation)… 5 appropriate path of policy.” I’d rather be higher, but I wouldn’t want to distort financial markets RANDAL QUARLES: to get that outcome.”22 Returning voting member 2019 “By lowering the federal funds rate this year, we are supporting the continued expansion of the economy. Overall, with these policy adjustments, I believe that the economy will remain in a good place.”11

BBH Foreign Exchange 2020 First Quarter Outlook | 2 1. Bullard, James. “The FOMC’s Substantial Turn During 2019.” Rotary Club of Louisville. Louisville, KY. 14 November 2019. 2. Kashkari, Neel. Article by Derby, Michael S. “Fed’s Kashkari Supports Rate Cuts, But Unsure How Many More Are Needed.” The Wall Street Journal, Wall Street Journal, 07 Oct. 2019, www.wsj.com/articles/ feds-kashkari-supports-rate-cuts-but-unsure-how-many-more-are-needed-11570462866. 3. Kashkari, Neel. “Kashkari at Thrivent Employee Event.” Discussion and Q&A. Minneapolis, MN. 05 November 2019. 4. Kashkari, Neel. “Neel Kashkari at UW La Crosse.” Discussion and Q&A. La Crosse, WI. 13 November 2019. 5. Brainard, Lael. “Federal Reserve Review of Monetary Policy Strategy, Tools, and Communications: Some Preliminary Views.” New York Association for Business Economics. New York, NY. 26 November 2019. 6. Williams, John. “No Man is an Island.” Asia Economic Policy Conference. San Francisco, CA. 14 November 2019. 7. Williams, John. Speech in New York, NY 13 December 2019 covered by Bloomberg. “Fed’s Williams Says Rate Cuts Have Put Economy on Strong Footing.” Reported by Boesler, Matthew. Bloomberg. 13 December 2019. 8. Clarida, Richard. “Trade Deal Progress Good for US Economy: Fed’s Clarida.” Interview by Liz Claman. Fox Business. 13 December 2019. 9. Evans, Charles. “Chicago Fed President Charles Evans Speaks with Yahoo Finance.” Interview with Brian Cheung. 06 November 2019. 10. Evans, Charles. Article by Derby, Michael S. “Fed’s Evans: Fed Has Moved Policy to Slightly Accommodative Stance.” The Wall Street Journal, Wall Street Journal, 06 Nov. 2019, https://www.wsj.com/articles/ feds-evans-fed-has-moved-policy-to-slightly-accommodative-stance-11573052575 11. Quarles, Randal. “Fredrich Hayek and the Price System.” William F. Buckley Jr. Program at Yale. New Haven, CT. 01 November 2019. 12. Kaplan, Robert. “Transcript: WSJ Interview With Dallas Fed President Robert Kaplan.” Interview with Nick Timiraos. 27 November 2019. 13. Kaplan, Robert. “CNBC Squawk Box.” Interview with Steve Liesman. 26 November 2019. 14. Powell. Jerome. “Building on the Gains from Long Expansion.” Greater Providence Chamber of Commerce. Providence, RI. 25 November 2019. 15. Powell. Jerome. “The Economic Outlook.” Joint Economics Committee. Washington, DC. 13 November 2019. 16. Powell, Jerome. “FOMC Press Conference.” Conference following FOMC December meeting, 11 December 2019. 17. Harker, Patrick. “An Economic Outlook.” Commercial-Industrial Realty Council’s 25th Annual Joint Holiday Dinner. Wilmington, DE. 13 November 2019. 18. Mester, Loretta. “Cybersecurity and Financial Stability Press Conference.” Federal Reserve Bank of Cleveland and Office of Financial Research. Cleveland, OH. 21 November 2019. 19. Mester, Loretta. “Speech at University of Maryland.” College Park, MD. 18 November 2019. 20. George, Esther. “Informing Today’s Monetary Policy Choices.” A Joint Conference of the Federal Reserve Banks of Kansas City and Dallas. Denver, Colorado. 18 October 2019. 21. Rosengren, Eric. “Financial Stability and Regulatory Policy in a Low Interest Rate Environment.” Norges Bank and International Banking, Economics and Finance Association. Oslo, Norway. 11 November 2019. 22. Rosengren, Eric. “Fed’s Rosengren on Economy, Fiscal Policy, Negative Rates.” Interview with Christopher Condon. Bloomberg Television. 18 November 2019.

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