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.
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
- St. Louis Fed president since April 2024;
- This will be Musalem’s first time voting on the FOMC.
Musalem (not shown) 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.”
