The (non)reaction to Wednesday's release of the details from the Fed's October meeting seems to say that the markets have fully priced-in a December rate hike. But, when it comes to the Fed, there is no such thing as a sure thing.
To see how the votes might line up on December 16, we looked to find the latest comments from each voting member of the Federal Reserve Open Market Committee (FOMC.)
Janet Yellen: Chairman of the Federal Reserve, Yellen has been a noted dove for most of her career at the Fed. However, her famous "live possibility" statement regarding a December rate hike in testimony before Congress on November 4 set market expectations solidly in the "yes" column. Yellen is concerned that the Fed will be backed into a corner with no options, if the economic recovery goes sour while interest rates are still zero.
Stanley Fischer: Vice Chairman of the Federal Reserve, Fischer is known as an expert on inflation. On November 12, he said that the negative effects of a strong dollar and low oil prices would moderate in 2016, and a December rate hike was likely if conditions remained the same. As head of the central bank of Israel during the financial crisis, he was the first to lower rates, and the first to raise them back.
William Dudley: Head of the New York Fed, Dudley is Vice Chairman of the FOMC, making him the #3 guy at the Fed. Noted for his dovish outlook earlier in the year, he has become concerned with waiting too long to start normalizing monetary policy, noting that "I don't favor waiting until I sort of see the whites in inflation's eyes" before raising rates. While unwilling to commit to a December rate hike, he come around to the idea of raising rates "quite soon,"
Daniel Tarullo: A member of the Board of Governors of the Fed, Tarullo is also a permanent member of the FOMC. He is on the record earlier this year as saying if the first hike came at all in 2015, it would be in December. A noted dove, he has pressed for keeping rates near zero for longer. He could conceivably be dragged along to consent to a December rate hike if a majority of his peers are ready for liftoff.
Lael Brainard: Also a member of the Board of Governors, Brainard rarely goes public with her views on monetary policy. She has been more concerned than others at the Fed over hiking rates, since it would strengthen an already strong dollar. As late as last week, she was warning about the knock-on effects to the global economy a December rate hike could have. She has been seen as hardening her dovish stance lately
Jerome Powell: Another member of the Fed Board of Governors and permanent member of the FOMC, Jerome Powell is something of an enigma when it comes to his views on monetary policy. Rarely speaking on the subject of a rate hike, lately he has come out to dampen expectations raised by more hawkish Fed officials. If economic conditions continue to improve, he may go along with a December rate hike.
Charles Evans: President of the Chicago Fed, Evans is a voting member of the FOMC this year. He is probably the most strident dove at the Fed since the departure of Minneapolis Fed president Narayana Kocherlakota. A disciple of quantitative easing, Evans believes conditions will not warrant a rate hike until late next year. Going further, he maintains that inflation will still be under 2% three years from now.
Jeffrey Lacker: Richmond Fed president Jeffrey Lacker is the most hawkish senior official at the Fed. The total opposite of Evans, he has wanted the Fed to raise rates long ago. A voting member of the FOMC this year, he believes that fears over low inflation and unemployment are overblown. In fact, he is worried that the Fed may have waited too late to stay ahead of inflation.
Dennis Lockhart: Known as a moderate, Atlanta Fed president Dennis Lockhart is usually on the same page as Janet Yellen. As Yellen has moved from dove to a little hawkish, so has he. Lockhart was fairly hawkish in his statements this week, but refrained from calling for a December rate hike. Saying that inflation was firming and global risks had abated, he announced "I'm comfortable with moving off zero soon."
John Williams: San Francisco Fed president John Williams has been moving toward the hawkish side of the spectrum as the year has progressed. An advocate of "early but gradual," he advocates getting a small first rate hike in books soon, so that the Fed won't have to resort to large rate hikes to fight inflation later. Last week, he said that there was "a very strong case" for a December liftoff. Also seen as a moderate who usually agrees with Yellen, his statements increase the likelihood of the Fed moving on interest rates soon.
Who Will Win?
The tally of voting members of the FOMC stands at five hawks, and five doves. Dudley could probably be persuaded to vote for a December rate hike, if strong employment numbers come in, and the economy continues looking decent. Powell would probably need more substantial evidence to come over to the hawk's camp.
As every Fed official likes to say, it's going to depend on the data available in mid December whether rates move from the zero bound or not.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.