Federal Reserve Chairman Ben Bernanke is likely to face some new dissenting votes when the make-up of the Federal Open Market Committee, the central bank’s policy-making committee, changes in January.
Four presidents of regional Fed banks will step into the rotation at the Fed’s policy meeting in late January: Charles Evans of Chicago, Charles Plosser of Philadelphia, Richard Fisher of Dallas and Narayana Kocherlakota of Minneapolis. They’ll join the eight permanent voters on the FOMC: seven Fed governors (one position is now vacant) and the New York Fed president.
Every Fed policy maker, including regional bank presidents, gets a voice at the table during FOMC meetings. But regional bank presidents draw more attention when they’re among the ones who cast votes, as Kansas City Fed President Thomas Hoenig showed when he formally objected to the Fed’s current policy at all seven of the committee’s meetings this year.
In the 2011 lineup, Evans will bring a dovish voice to the FOMC table, arguing for strong action from the Fed to combat a deflation threat and backing Bernanke’s move to buy $600 billion in long-term U.S. Treasurys to help the economy, a policy known as quantitative easing. Evans has appeared even more forceful in recent months than Bernanke and William Dudley, the New York Fed president. Evans will easily fill the shoes of Boston Fed President Eric Rosengren, a consistent dove in 2010 who moves off the voting rotation.
Most attention among regional bank presidents will likely go to Plosser and Fisher, two policy makers who have not been shy about casting dissenting votes. Fisher dissented five times in 2008, either calling for higher interest rates or objecting to committee moves to lower rates. He was joined twice by Plosser, who objected to rate cuts at the time.
The other incoming voter, Kocherlakota, will have his first voting seat on the FOMC since taking office in October 2009. He has at times questioned the efficacy of the low-rate policy for addressing the economy’s ills, but this month he publicly supported the Fed’s latest decision to embark on a new round of quantitative easing.
While chairing a committee with a diverse set of views, Bernanke has been able to push through his policy — particularly a second round of bond purchases — even with internal dissent by a minority. He won two supporting votes with the addition of Janet Yellen and Sarah Bloom Raskin to the Fed’s Board of Governors, and could get another if the full Senate gets around to confirming nominee Peter Diamond this year.
The presidents who surrender their votes in January are Rosengren, an ally of Bernanke; Hoenig, the dissenter; James Bullard of the St. Louis Fed, who lately has been on the side of doing more to help the economy; and Sandra Pianalto of the Cleveland Fed, who tends to vote with the chairman.
