Only four of the 2008 voting members from the Federal Reserve's monetary policy board will vote in the first meeting of 2009. The lineup has lost some of its chief inflation-fighters and added some more dovish members.
Dovish voters on the Federal Open Market Committee emphasize the need for massive government intervention to save the financial sector, while more hawkish voters are concerned that expanding the Fed's balance sheet is distorting the market and could lead to moral hazard.
The voting bloc of the Federal Open Market Committee is ideally made up of 12 voters: seven members from the Federal Reserve Board, the President of the New York Fed, and four other regional Fed Presidents who vote on a rotating basis.
Three of the six outgoing voters are more hawkish than the Chairman. This includes Dallas Fed President Richard Fisher, who dissented from an aggressive policy stance on five separate occasions, Philadelphia Fed President Charles Plosser, who dissented twice, and Minnesota Fed President Gary Stern, who speaks like a hawk but votes like a dove.
Three other outgoing voters tend to vote alongside the Chairman. This includes former New York Fed President Tim Geithner, who was confirmed as Treasury Secretary on Monday, Cleveland Fed President Sandra Pianalto, and Fed Governor Randall Kroszner.
With three hawkish members off the Board, economists from Barclays Capital say the FOMC bias is clearly on the dovish side.
"All members seem to share the view that downside risks continue to dominate the economic outlook, and most have been supportive of the Fed's financial market interventions and balance sheet expansion," they wrote in a client note.
The four members staying on from last year include Fed Chairman Ben Bernanke, Vice Chairman Donald Kohn, Board member Kevin Warsh, and Elizabeth Duke, who took office in August.
William Dudley, appointed Tuesday morning to succeed Tim Geithner as president of the New York Fed, is the newest member to join the committee.
According to William Sullivan, chief economist at JVB Financial Group, there is "no doubt" that Bill Dudley will take a dovish stance. He will be a "strong advocate for pumping up the Fed's balance sheet, without a doubt," Sullivan said on Bloomberg TV.
Another new voter is San Francisco Fed President Janet Yellen, who is considered strongly dovish. In early January she said, "the adverse feedback loop goes on, as [deteriorating] economic conditions, in turn, are intensifying financial sector distress," adding the circumstances call for "prompt and aggressive action."
Chicago Fed President Charles Evans, another dove, will also take a voting seat. Earlier in the month he said, "We expect large amounts of more traditional types of fiscal stimulus to increase aggregate demand. I believe a big stimulus is appropriate."
Atlanta Fed President Jeffrey Lockhart will be voting for the first time on Wednesday. Previous comments suggest a dovish bias for him as well.
The only incoming voter with a hawkish reputation is Richmond Fed President Jeffrey Lacker. He expressed concern about the Fed's recent shift to quantitative easing.
"The dramatic recent expansion in Federal Reserve lending, and government support more broadly, has extended public sector support beyond existing supervisory reach, and thus could destabilize the financial system," he said.
President Barack Obama has nominated Daniel Tarullo to replace Randall Kroszner. Although he is likely to be confirmed, the Senate has not reached a decision yet.
Tarullo, a professor at Georgetown University and a White House economic aide in the previous Democratic administration, appears to have a dovish bias.
At his confirmation hearing in mid-January, he said banks require more capital to ensure stability in the financial sector. "At present, my strong suspicion is that capital levels at many institutions are not where we want them to be," he said.
With doves outnumbering hawks, economists expect to see the Fed continuing their efforts to increase the flow of credit through a series of lending programs.
By Patrick McGee and edited by Nancy Girgis
©CEP News Ltd. 2009