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SI Research: Hawkish or Dovish–6 FOMC Voting Members’ Stance
Aspire | 08 December 2015
By: Lim Si Jie
Articles (169) Profile

In the recently released minutes from the Federal Open Markets Committee (FOMC) meeting in October, Federal Reserve policy makers made a conscious decision in October to prepare markets for a potential December rate hike, provided that US economic data justifies the increase in borrowing costs.

While most members of the policy-setting FOMC were not comfortable with raising rates in October, the minutes seemed to suggest that the committee was prepared to ponder a December liftoff.

Highlights from October Minutes

“Most FOMC members felt conditions for a rate hike “could well be met by the time of the next meeting”, was a key phrase included in the October minutes.

“Members also emphasized that this change was intended to convey the sense that, while no decision had been made, it may well become appropriate to initiate the normalization process at the next meeting.”

FOMC Voting Members: Hawkish Or Dovish?

So what is the current voting stance of the FOMC voting committee since the last vote in September? Let us take a look at some of the most noteworthy quotes from recent FOMC voting members’ speeches.

Fed SF John Williams: Strong Case for Hike

John Williams, president of the Federal Reserve Bank of San Francisco, believes that “there is a “strong case” for raising interest rates when Federal Reserve policymakers meet next month, as long as U.S. economic data does not disappoint”. This statement was made after the conference at University of California Berkeley’s Clausen Center.

Voting Stance: Hawkish

Fed NY William Dudley: Economic Data Is Still Key

William Dudley, the influential head of the New York Fed, was quoted that “The Federal Reserve should ‘soon be ready’ to raise interest rates as U.S. central bankers grow confident that low inflation will rebound and that employment remains stable”. He also pointed out that Fed’s next move will be very dependent on economic data.

Voting Stance: Dovish Turned Hawkish

Fed VA Jeffrey Lacker: Still Hawkish

Federal Reserve Bank of Richmond President Jeffrey Lacker said in a television interview that he believes the US central bank should raise rates when it meets next month. A constant hawk within the FOMC voting committee, Lacker believes that the case for a rate increase has been “strong” for much of this year, and little has changed on that front.

Lacker affirmed that he is still where he was in October and September, believing that it is time for the central bank to raise rates off of their current near-zero levels.

Voting Stance: Hawkish

Fed AT Dennis Lockhart: Markets Have Settled to Introduce A Hike

While Federal Reserve Bank of Atlanta President Dennis Lockhart was positive that financial-market volatility has settled down enough for him to feel comfortable with lifting short-term rates soon, he still sees persistently low inflation as a concern. Lockhart believes that “the first move does require faith that we’re going to see inflation rise up to the target” rather than waiting for inflation to hit the target before rates lift off.

Voting Stance: Slightly Hawkish

Fed Vice-Chair Stanley Fischer: No Surprise If Rates Are Hiked

Fed Vice-chairperson believes that the Fed has “done everything they could to avoid surprising the markets and governments” after he hinted that “some major central banks” could move away from near-zero interest rate policy “in the relatively near future”.

Voting Stance: Dovish Turned Hawkish

Fed Chairwoman Janet Yellen: December Hike a Live Possibility

According to Janet Yellen, the US economy is “performing well” and “it could be appropriate” to raise rates at the Fed’s final policy meeting of the year in mid-December. Fed Chairwoman Yellen emphasized that the Fed’s timing would rest on the next few rounds of economic data and a rate hike in “December would be a live possibility”. Yellen has been constantly reminding the market that rate hike in December is highly possible, just like she did in the October FOMC minutes and recent speeches.

Voting Stance: Hawkish

Investors Takeaway:

With more than half the voting members adopting a hawkish stance, it seems that the possibility of a December liftoff looks more likely by the day. The only thing that can stop the Fed from lifting interest rates would be poor economic data in the next few months.

Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.


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