In 2025, the rotation of the Federal Reserve's voting members will make the hawk-dove divide more pronounced, and internal disagreements are expected to intensify

As 2025 approaches, the voting members of the Federal Open Market Committee (FOMC) of the Federal Reserve will undergo changes, and the composition of the new FOMC is expected to have a significant impact on monetary policy decisions. This change comes at a critical moment when inflation concerns in the United States are once again rising, and at the same time, a series of potential policy changes from newly elected President Trump adds complexity to the Fed's future decisions.

In last week's December meeting, the Federal Reserve lowered the benchmark interest rate by 25 basis points and hinted that there may only be two rate cuts in 2025. Federal Reserve Chairman Jerome Powell emphasized that future rate cuts will be more gradual and will depend on whether inflation continues to decline.

Changes in Voting Members in 2025

The FOMC is composed of the following members: seven members of the Federal Reserve Board, including Chairman Powell; the President of the New York Fed, who has a permanent voting seat; and four regional Fed presidents, who rotate annually among the 11 regional Fed presidents. Although non-voting members also participate in meeting discussions, voting members have a more direct influence on policy outcomes.

In 2025, the new voting members will include Boston Fed President Susan Collins, St. Louis Fed President Alberto Musalem, Kansas City Fed President Jeff Schmid, and Chicago Fed President Austan Goolsbee.

The FOMC voting members who will be stepping down in 2025 include Cleveland Fed President Beth Hammack, San Francisco Fed President Mary Daly, Richmond Fed President Tom Barkin, and Atlanta Fed President Raphael Bostic. Notably, Hammack voted against the rate cut in the December meeting due to concerns about inflation.

Core Views of New Voting Members

Here are the latest policy positions of the newly appointed FOMC voting members for 2025.

St. Louis Fed President Alberto Musalem. He took office in April this year, and 2025 will be Musalem's first time participating in FOMC voting. Musalem advocates for patience regarding rate cuts:

At the beginning of December, he pointed out that the inflation data released since September indicates that the risk of a stagnation or even reversal in the inflation cooling process is increasing. "Now may be the time to consider slowing the pace of rate cuts or pausing rate cuts to carefully assess the current economic environment, upcoming information, and the evolving outlook."

Kansas City Fed President Jeff Schmid. He took office in August 2023, and 2025 will be Schmid's first time participating in FOMC voting. Schmid emphasizes the uncertainty surrounding the ultimate level of interest rates and advocates for gradual rate cuts to avoid market volatility:

While I support reducing the restrictive nature of policy, I prefer to avoid large adjustments, especially considering the uncertainty regarding the ultimate direction of policy and my desire to avoid exacerbating volatility in financial markets.

Boston Fed President Susan Collins. She took office in July 2022 and served as an FOMC voting member in 2022. Collins believes that further policy easing is needed but emphasizes the importance of carefully assessing economic data and risk balance:

Collins stated in mid-November that although the endpoint of the policy remains uncertain, some additional policy easing is needed. She reiterated that interest rates have not followed a predetermined path, while describing the overall condition of the U.S. economy as good. "The policy adjustments made so far have allowed the FOMC to cautiously move forward, taking the time to fully assess the impact of existing data on the outlook and the associated risk balance."

Chicago Fed President Austan Goolsbee. He took office in January 2023 and served as a voting member of the FOMC in 2023. Goolsbee is a dovish official who believes that the Federal Reserve's policy is still above neutral levels and expects borrowing costs to decline significantly over the next 12-18 months. He revealed last Friday that he slightly raised his interest rate expectations for next year but still anticipates a decrease in borrowing costs:

I believe we are on the path to the 2% inflation target, and there is still significant room for interest rates to decline over the next 12-18 months.

Analysis Commentary

The core issue facing the Federal Reserve FOMC is: how quickly should interest rates be lowered while inflation remains above the 2% target level? This question has become more complicated due to potential fiscal policies that the new Trump administration may implement. Some economists expect that Trump's policies of seeking to raise tariffs, cut taxes, and massively deport immigrants could push inflation up and put pressure on the labor market.

There have already been two instances this year where Fed voting members cast dissenting votes at FOMC meetings, reflecting divisions within the Federal Reserve. For example, in September 2024, Fed Governor Bowman opposed a 50 basis point rate cut, arguing that the cut was too large and advocating for a smaller reduction. In December 2024, Cleveland Fed President Hammack opposed a rate cut, advocating for maintaining the current rate.

According to Bloomberg's analysis, there may be more divisions within the Federal Reserve FOMC in 2025. The voting members next year will have a more dispersed policy stance, with more pronounced views on both the hawkish and dovish ends, and fewer centrist members. While this division may increase uncertainty in decision-making.

In this regard, former Fed Vice Chairman Don Kohn believes that if the tricky policy issues facing the FOMC lead to more dissent next year, it is not necessarily a bad thing. "I don't think there's anything wrong with occasional dissent. I think the public should be reassured that the FOMC is listening to different viewpoints."