Who Votes on Fed Policy Next Year Is Changing. Here’s What to Know

(Bloomberg) -- New voters are set to rotate onto the Federal Reserve’s interest-rate-setting committee just as renewed inflation concerns inject a fresh layer of complexity into the central bank’s decision making. 

The Fed lowered its benchmark policy rate by a quarter percentage point earlier this month, and signaled just two reductions for 2025. Chair Jerome Powell made clear the central bank is entering a new phase where future rate cuts will likely be at a more gradual pace and depend on whether inflation ebbs.

“I think it’s a pretty strong message that a cut in January is unlikely,” said Jan Hatzius, chief economist at Goldman Sachs. “Beyond that, the data are really going to have to drive it.”

The Federal Open Market Committee, which votes on changes in interest rates, includes a rotating cast of presidents from 11 of the regional Fed banks, in addition to the seven Fed governors and the president of the New York Fed.

In 2025, Susan Collins of Boston, Alberto Musalem of St. Louis, Jeff Schmid of Kansas City and Austan Goolsbee of Chicago will rotate onto the committee. That said, non-voting officials still actively participate in policy deliberations at every meeting.

The key question facing new voters and the committee: How quickly should policymakers lower rates with inflation still above the central bank’s 2% target?

The debate among Fed officials could be complicated by a slew of potential policy changes from President-elect Donald Trump, whose plans to impose higher tariffs, deport millions of immigrants and cut taxes could push up inflation and constrain the labor market, according to some economists’ estimates.

Two policymakers have already dissented in recent months. Fed Governor Michelle Bowman voted against September’s decision to lower rates by a half percentage point, preferring a smaller cut. And Cleveland Fed President Beth Hammack favored no reduction in December.

What Bloomberg Economics Says...

“Bloomberg Economics expects to see more FOMC dissents in 2025. Our scoring of individual committee members along a hawk-dove spectrum suggests increased dispersion among FOMC voters next year, with views dispersed toward the ends of the spectrum, with less clustering around the center.”

— Anna Wong, Chris Collins and Eliza Winger

To read the full note, click here. 

Should the thorny policy questions facing the committee raise the possibility of additional dissents next year, it wouldn’t necessarily be a bad thing, said Don Kohn, a senior fellow at the Brookings Institution and a former Fed vice chair. 

“I don’t see anything wrong with occasional dissents,” Kohn said. “And I think the public should be reassured that alternative perspectives are getting heard inside the committee.”

Hammack is among the officials rotating off the committee in 2025. Others include San Francisco Fed President Mary Daly, Richmond Fed President Tom Barkin and Atlanta Fed President Raphael Bostic.

Here’s a look into the incoming voters’ latest views:

Alberto Musalem

Musalem has supported a patient approach to rate cuts. In early December, ahead of the Fed’s latest interest-rate decision, he flagged inflation data that had come in since September, saying the figures suggested greater risk that progress on cooling inflation “could stall, or possibly reverse.” 

“The time may be approaching to consider slowing the pace of interest rate reductions, or pausing, to carefully assess the current economic environment, incoming information and evolving outlook,” he said. 

Jeff Schmid

Schmid has emphasized there is uncertainty over where interest rates will ultimately settle. Officials largely agree that policy is restraining the economy since the Fed’s benchmark rate lies above most estimates of the so-called neutral rate, which neither restricts nor promotes economic activity. But there is disagreement over how far officials need to cut to reach that neutral level.  

Schmid has said a slower pace of rate cuts will allow officials to find out. 

“While I support dialing back the restrictiveness of policy, my preference would be to avoid outsized moves, especially given uncertainty over the eventual destination of policy and my desire to avoid contributing to financial market volatility,” Schmid said on Oct. 21.

Susan Collins

Collins said in mid-November that although the final destination for policy is uncertain, “some additional policy easing is needed.” She reiterated that rates are not on a preset path, while describing the economy as “in a good place overall.” 

“The policy adjustments made so far enable the FOMC to be careful and deliberate going forward, taking the time to holistically assess implications of the available data for the outlook and the associated balance of risks,” Collins said. 

Austan Goolsbee

Goolsbee has repeatedly said he views the Fed’s policy stance as well above neutral — a view he reiterated after December’s rate cut. 

He said he adjusted his outlook for interest rates a little higher for next year, but still expects borrowing costs to fall. 

“I’ve made the rate path a little bit more shallow in 2025, but I’ve been saying that the overall thread is that inflation is way down,” Goolsbee said Friday. “I believe we’re on path to 2% and over the next 12-18 months rates can still go down a fair amount.”

--With assistance from Jonnelle Marte, Michael McKee, Catarina Saraiva and Craig Torres.

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