President Trump has made no effort to hide his disdain for Fed Chairman Jerome Powell, whose term expires in May 2026.
The President’s appointee will most certainly share his propensity for lower interest rates. In the case of perceived front-runner Kevin Hassett, there also may be a greater transparency from a crypto-friendly chairman.
While the headlines will focus on the appointee, investors may be well-served evaluating the full twelve person roster of voting members of the Federal Open Market Committee to evaluate the likely trend of short-term interest rates in the coming year.
The four regional Fed governors only serve as voting members for a single year. Attempting to match the ideology of the current members to their replacement may help to identify the pending shift of the voting body.
Susan Collins of Boston has recently indicated she’s not inclined to cut rates further. She’ll be replaced by Beth Hammack of Cleveland whose concern for inflation also suggests she’s also unwilling to lower rates at this time. No change.
Jeffrey Schmid of Kansas City voted against the October 2025 rate cut. He’ll be replaced by Lorie Logan of Dallas who has shared a concern for inflation. It may be a stretch to suggest Logan would go as far as to cast a vote that dissents with consensus, but the sentiment is similar. No material change.
The two remaining transitions are materially different.
Alberto Musalem of St. Louis has been focused on the persistence of high inflation, noting that he believes there is “limited room” for additional easing without making policy “overly accomodative.” He’ll be replaced by Anna Paulson of Philadelphia. She has stated a concern for the labor market and thus supported additional interest rate cuts. This will result in a clear shift to a more dovish or accomodative voting member.
Finally, Austan Goolsbee of Chicago, pegged as a centrist will be replaced by Neel Kashkari of Minneapolis. Neel is undoubtedly a dove – repeatedly called for lower interest rates to stimulate the economy.
Again, the headlines will focus on Hassett or whomever the President appoints as the new chair effective in May of 2026. But for investors focused on the propensity of the voting body to follow the chair’s lead to further lower rates, it is important to note a material change in the composition of the board. Two dovish Fed governors will join the chairman to further shift the balance of an already divided Fed towards one that is inclined to engage in additional interes rate cuts.