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Bonds News

PENPIX-A look at Fed voters this year and next

Nov 13 (Reuters) - The voting lineup on the Federal Reserve’s policy-setting Federal Open Market Committee is about to shift once again.

Every year, four regional Fed bank presidents rotate out of voting seats, making way for four others. The current voting lineup will hold for the FOMC gathering on Dec. 15-16 before the new voters come in at the Jan. 26-27 meeting.

Following is a brief description of the policy views of both the current voters and the 2010 lineup.

Officials believed to emphasize curbing inflation at all costs are tagged hawks while policy-makers concerned about promoting economic growth and full employment earn the dove designation.

The panel next year retains the balance of sentiment between hawks and doves, despite the rotation in voting power among regional Fed bank presidents. For a story on the changes, see [ID:nN28305235].

PERMANENT VOTERS ON FOMC

All members of the Fed’s Washington-based Board of Governors and the head of the New York Federal Reserve Bank have permanent votes on the FOMC. Currently, there are two vacancies on the Fed board.

* Fed Chairman Ben Bernanke (Dovish Centrist)

Bernanke stands in the middle of the hawk-dove scale, according to analysts. He has led the Fed’s aggressive cuts to interest rates to near zero and flooding the financial system with cash. His academic focus on the Great Depression makes him particularly attuned to deflation risks, lending a dovish bent to his macroeconomic views.

“Accommodative policies will likely be warranted for an extended period,” he said on Oct. 9. “At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road.”

* Fed Vice Chairman Donald Kohn (Dovish Centrist)

Kohn is also seen in the middle of the spectrum but shading to the doves’ side. He has been outspoken in describing risks to the fragile recovery.

But he has also said the Fed must be ready to move smartly when appropriate to remove its support for the economy.

“We have the tools to exit our unusual policies when the time comes. And we must act well before demand pressures or inflation expectations threaten price stability,” Kohn said on Oct 13.

* Fed Governor Kevin Warsh (Hawkish Centrist)

Warsh had been closely linked to centrist views on risks to the recovery but recently showed some hawkish feathers by suggesting the Fed may have to tighten policy aggressively before clear signs emerge of an entrenched economic upturn.

“Prudent risk management indicates that policy likely will need to begin normalization before it is obvious that it is necessary, possibly with greater force than is customary,” he said on Sept. 24.

The next day he was quick to stress that his comments did not mean the Fed would make a move soon. “I’m confident markets will not conflate those (frank discussions of the policy outlook) with imminence.”

* Fed Governor Elizabeth Duke (Unclear policy bent)

Duke spent most of a career as a community banker, a background that informs her approach to policy. In public remarks, she tends to focus much more closely on regulatory issues and consumer protection than the broader economy, making her monetary leanings somewhat of a question mark.

* Fed Governor Daniel Tarullo (Unclear policy bent)

A finance lawyer by training, Tarullo is in charge of the Fed’s bank supervisory function. To date the only board member appointed by President Barack Obama, he was the architect of the Fed’s push to regulate executive compensation and generally favors forcing big banks to build larger capital cushions.

* New York Fed President William Dudley (Dovish Centrist)

Dudley, a former Goldman Sachs chief economist, is generally seen in the center but with a dovish slant. He previously headed the New York Fed’s markets group and played a leading role in creating crisis-fighting tools.

“The unemployment rate is much too high and it seems likely that the recovery will be less robust than desired. This means that the economy has significant excess slack and implies that we face meaningful downside risks to inflation over the next year or two,” he said on Oct. 5.

REGIONAL BANK PRESIDENTS WHO WILL VOTE IN 2010

*Boston Fed President Eric Rosengren (Dove)

Rosengren hails from an area where finance is a big part in the economy and tends to favor a looser policy stance.

“Significant excess capacity in labor markets has the potential to be disinflationary at a time when the inflation rate is already below where we expect it to settle in the long run,” he said on Oct. 2. “Despite the many positive signs we are seeing in the economy, the financial markets and the real economy need more time to heal. There are significant impediments to more rapid growth.”

* Kansas City Fed President Thomas Hoenig (Hawk)

Hoenig, an Iowa State University PhD who has worked for the Kansas City Fed since 1973, is a noted hawk who also falls in the camp of the so-called “freshwater” economists from the U.S. heartland who believe the central bank should take a hands-off approach to both the economy and financial markets.

“I don’t know what the neutral interest rate is. I am not that clairvoyant. But I am pretty confident it is not zero. And if you leave it at zero for too long a period, then we will have other issues,” he said on Oct. 8.

* Cleveland Fed President Sandra Pianalto (Centrist)

Analysts view Pianalto as a policy centrist, though recent comments have sounded “dovish” given a weak labor market and weak financial system.

“I expect to see a gradual and bumpy recovery as our economy addresses these challenges. Still, despite some concerns that inflation will be unleashed from its anchors, I believe there is enough slack in the economy to keep inflation subdued for some time,” she said on Oct. 1

* St. Louis Fed President James Bullard (Hawkish Centrist)

James Bullard was assumed to be a hawk when he took the helm of the St. Louis Fed in April, but some comments suggest an openness to more dovish views.

This week, he gave an interview to the Financial Times where he argued that asset sales would be a perfectly adequate way to remove policy stimulus. Still, he agrees that tightening should not come soon.

“You are going to need to have jobs growth and you are going to need to have unemployment declining” before moving on rates, he told the FT on Nov. 8.

On October 11, he said inflation risk should not be underestimated: “I am concerned about a popular narrative in use today -- the narrative being that the output gap must be large since the recession is so severe.”

REGIONAL BANK PRESIDENTS WHO HAVE A VOTE THIS YEAR

* Chicago Fed President Charles Evans (Centrist)

Evans, who before becoming the bank’s president was its director of research, is seen as a policy centrist.

He said on Sept. 9 that interest rate hikes are “some time down the road ... As the economy continues to improve, and when we see rising inflation pressures, Fed policy will respond aggressively.”

* San Francisco Fed President Janet Yellen (Dove)

Yellen, who was a top official in the Clinton White House, is considered one of the more “dovish” Fed officials. She has focused her recent remarks on the high level of unemployment and the risk of falling consumer prices.

“The big issue is how strong the upturn will be. With such enormous reservoirs of slack in the form of high unemployment and idle productive capacity, we need a strong rebound to put unemployed people back to work and get underutilized factories, offices, and stores humming again. Unfortunately, my own forecast envisions a less-than-robust recovery,” she said on Nov. 10

* Richmond Fed President Jeffrey Lacker (Hawk)

Lacker has made a name as one of the most hawkish members of the Fed. Lacker, a University of Wisconsin PhD, could also be grouped with “freshwater” economists.

He said in August the timing of any Fed decision to raise interest rates would be hard to predict but would depend on a rebound in consumer spending, and should not necessarily wait until the weak labor market has fully recovered.

“Reestablishing growth is key, a pickup in consumer spending growth will be key,” he said. “I’m not sure we should be held hostage to the unemployment rate.”

Asked this week if a hike was in the cards for next year, Lacker responded: “It is too soon to say ... it could take longer than that. What I’m going to look for is growth that is strong enough and well-enough established that we need higher real interest rates.”

* Atlanta Fed President Dennis Lockhart (Hawkish Centrist)

Lockhart, who spent 17 years at Citibank, tends to be sceptical of regulation and government intervention, giving his policy views a hawkish tone. But recently joined a growing chorus of officials arguing the Fed might have to pay closer attention to asset prices.

“Certainly there are scenarios in which the unemployment rate might still be at a frustratingly high level, in which still the overall conditions justify beginning to tighten. Going forward I intend to include asset price movements as one of the things to be watched.” (Reporting by Mark Felsenthal, Pedro DaCosta and Kristina Cooke; Editing by Andrea Ricci)

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