Risk of a more hawkish Fed

SINGAPORE (Oct 17): Speculation is rising about an imminent nomination to replace Janet Yellen as chair of the Federal Reserve. None of the main candidates would push the Fed in a more dovish direction. Continuity is most likely, but there is the risk of a hawkish tilt if John Taylor is appointed.

The Federal Open Market Committee (FOMC) that votes on monetary policy is made up of the seven members of the Federal Reserve Board of Governors in Washington (which currently has three vacancies), plus the president of the New York Fed and a rotating selection of four from the other eleven regional Federal Reserve banks. All of the regional Fed presidents participate in the meeting, and submit their views to make up the “dot plot” of interest rate projections, but not all vote.

About half of the Fed officials have a PhD in economics. Having non-economists on the FOMC is useful in bringing a different perspective, but it is unlikely that someone with a background in law or financial markets is going to have much influence on the vote of a well-trained economist.

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