By Ann Saphir
(Reuters) – A slightly more hawkish set of Federal Reserve regional bank presidents will become voters on the U.S. central bank’s rate-setting panel in 2025, raising the chance that any further interest rate cuts next year could spur more dissents like the one seen on Wednesday from the head of the Cleveland Fed.
Fed Chair Jerome Powell has already signaled a pause in the rate cuts in January, saying on Wednesday that policymakers will move cautiously, with further reductions in borrowing costs contingent on seeing more progress in lowering inflation.
But the annual change in the makeup of the Federal Open Market Committee’s voting members may add marginally to resistance to additional cuts.
“It opens up the door to more dissenting votes next year,” said TD Securities analyst Oscar Munoz, because the incoming group leans hawkish compared with the outgoing group.
All 12 regional Fed presidents discuss and debate monetary policy at each of the U.S. central bank’s eight annual meetings, and many have said their status as voter or non-voter has no bearing on their sway around the policy-setting table.
Still, while all seven Fed governors and the New York Fed president vote on rates at every meeting, only four of the 11 other Fed regional presidents do, with each getting a one-year turn on a set schedule.
This week’s rate cut, which capped a full-percentage point of reductions to the Fed’s benchmark borrowing rate since September, was already a close call.
Four of the Fed’s 19 policymakers wrote down projections that show they felt the latest rate cut was not appropriate, and one, Cleveland Fed President Beth Hammack, cast a dissenting vote.
Hammack rotates off the voting panel next year. Voting in her place will be Chicago Fed President Austan Goolsbee, whose view that the policy rate will need to fall a fair bit next year to avoid unduly slowing the labor market marks him as decidedly more dovish than Hammack.
But two other new voters – St. Louis Fed President Alberto Musalem and Kansas City Fed President Jeffrey Schmid – give the 2025 rate-setting panel a more hawkish bent.
They will replace Atlanta Fed President Raphael Bostic and San Francisco Fed President Mary Daly, who are seen as centrists. Bostic and Daly will next vote in 2027.
TD Securities’ Munoz is among the analysts who speculate that Musalem was one of the four policymakers who submitted projections that signaled opposition to this week’s rate cut, joining Hammack and another non-voting Fed president, perhaps even Schmid.
