Look for a Slightly More Dovish Tilt to the Fed's Policy Group in 2023
The Federal Reserve’s policy makers are going to become incrementally more dovish in 2023, as a new roster of senior officials brings a greater focus on maximum employment to its policy-setting committee.
With the Federal Open Market Committee’s annual rotation of voters on monetary policy, James Bullard of the St. Louis Fed, Loretta Mester of the Cleveland Fed and Esther George of the Kansas City Fed — all of whom have favored sharply higher interest rates to help curb inflation — will lose their votes. Boston’s Susan Collins, a newcomer who’s considered to be neutral, will also lose her voting seat.
Coming on as FOMC voters will be the Chicago Fed’s new president, Austan Goolsbee, believed to be dovish, Philadelphia’s Patrick Harker and Dallas’s Lorie Logan, both seen as centrists, and Minneapolis’s Neel Kashkari, who is currently an arch hawk.
The upshot is that policy doves, who are especially attuned to the health of the labor market, are likely to have a greater weight around the table during the eight policy meetings in 2023.
The actual impact might be initially hard to discern. There’s little distance in the views of doves and hawks at the moment —nearly all officials see the Fed’s target rate exceeding 5% by the end of next year, and none expect to cut rates, according to their latest economic projections. Also, Chair Jerome Powell has led one of the fastest rate-hiking campaigns in decades with little dissent, a reflection of his strong control over the committee.