The Big Picture

Briefing.com Summary:

*Several voting Fed bank presidents lean hawkish, creating a challenging rate-cut backdrop for the FOMC early in 2026. 

*Potential turnover among Fed governors as 2026 unfolds is apt to lead to a more dovish-minded class of governors.

*Jerome Powell's time as Fed chair is running out, and so may his time as Fed governor.

There are twelve voting members on the Federal Open Market Committee (FOMC): the seven members of the Board of Governors and five of the twelve Federal Reserve Bank presidents. The members of the Board of Governors are nominated by the President of the United States and are confirmed by the Senate.

The president of the Federal Reserve Bank of New York has a permanent vote on the committee, so the remaining four presidents with a vote rotate annually. They serve one-year terms beginning January 1 each year.

Other Federal Reserve bank presidents attend the FOMC meetings and contribute to the discussions, but they do not cast a vote for setting policy.

From the sound of things, the 2026 FOMC meetings will be ripe for dueling over the proper policy path—and that's before a new Fed sheriff rides into town in the latter half of the year, who will undoubtedly be a rate-cut gunslinger.

Operating on Borrowed Time

Whose names will you be hearing a lot throughout 2026? The seven governors currently are Jerome Powell (Chairman), Michael Barr, Michelle Bowman, Lisa Cook, Philip Jefferson, Stephen Miran, and Christopher Waller.

Mr. Powell's term as Chair of the Board of Governors ends in May 2026. His term as Fed governor, however, extends to January 31, 2028. He has not said if he will step down from the board when he is replaced as Fed chair by President Trump's nominee, but pundits expect him to resign his governor position when his term as Fed chair ends.

President Trump has made it abundantly clear that Fed chair Powell is operating on borrowed time, saying he will name the replacement for the Fed chair's position in early 2026. Press reports are buzzing with speculation that NEC Director Kevin Hassett, an advocate for a much lower policy rate, is going to get the president's nod to be Chairman of the Board of Governors.

Fed governors typically vote in unison with the Fed chair. Fed Governor Bowman, however, shocked the world with a dissenting vote at the September 2024 FOMC meeting, preferring a smaller 25-basis-point rate cut. That was the first dissent by a Fed governor since 2005.

Fed Governor Miran, who took an unpaid leave of absence from his position as chairman of the Council of Economic Advisers under President Trump to fill the seat vacated by the resignation of Adriana Kugler, whose term expires January 31, 2026, dissented in favor of larger 50-basis-point cuts at the September and October FOMC meetings.

If there is going to be dissension in the ranks, it usually originates among the voting Federal Reserve bank presidents, but it is clear now that some governors are fine challenging the party line. 

In terms of the bank president names you'll want to be closely acquainted with in 2026, they are Beth Hammack (Cleveland), Neel Kashkari (Minneapolis), Lorie Logan (Dallas), Anna Paulson (Philadelphia), and John Williams (New York).

The Lineup

Each FOMC member acknowledges that they are data dependent for their policy view, yet the market makes a living out of reading between their speech lines when thinking about what the FOMC will do with monetary policy.

Below we feature excerpts from recent speeches/interviews from the FOMC presidents who hold a vote in 2026 to provide some flavor for their perceived policy tilt.

Beth Hammack

• November 20, 2025: Opening Remarks to 2025 Financial Stability Conference
  
  
  • Inflation has been running above the Fed’s 2 percent objective for four and a half years. Lowering interest rates to support the labor market risks prolonging this period of elevated inflation, and it could also encourage risk-taking in financial markets. Financial conditions are quite accommodative today, reflecting recent gains in equity prices and easy credit conditions. Easing policy in this environment could support risky lending. It could also further boost valuations and delay discovery of weak lending practices in credit markets. This means that whenever the next downturn comes, it could be larger than it otherwise would have been, with a larger impact on the economy. At that point, policy would have less space to further reduce rates and offset weak demand.
    
    Sometimes cutting rates is described in risk-management terms as taking out insurance against a more severe slowdown in the labor market. But we should be mindful that such insurance could come at the cost of heightened financial stability risks. There’s already a substantial body of research on how persistent inflation can increase risks for banks and put pressure on household finances. The challenging period we’re currently experiencing for monetary policy could well be the subject of future research on the financial stability implications of having both sides of the Fed’s mandate under pressure.
    
    
  • Note: In a CNBC interview later that day, Ms. Hammack said inflation is still high and trending in the wrong direction, and that she still believes policy needs to be "somewhat restrictive."
    
    
  • Tilt: Hawkish

Neel Kashkari

•  November 13, 2025: Interview with Bloomberg News
  
  
  • “The anecdotal evidence and the data we got just implied to me underlying resilience in economic activity, more than I had expected.” Available data have suggested “more of the same” for the economy, Kashkari said.
    
    For the upcoming Dec. 9-10 rate decision, “I can make a case depending on how the data goes to cut, I can make a case to hold, and we’ll have to see.”
    
    
  • Note: Mr. Kashkari indicated that he did not support the Fed's last rate cut in October.
    
    
  • Tilt: Neutral

Lorie Logan

• November 21, 2025: Opening remarks for panel titled 'Economic uncertainty and the design and conduct of monetary policy'
  
  
  • The FOMC has made two 25-basis-point rate cuts in recent months. While I supported the September rate cut, I would have preferred to hold rates steady at our October meeting...
    
    Policy restriction is a function of real interest rates, not nominal ones. Forecasters expect about 2.7 percent inflation over the coming year. That puts the current real fed funds rate around 1.2 percent, which is toward the low end of typical model-based estimates of neutral, although all of these estimates are highly uncertain. Put another way, with inflation running persistently above target, a fed funds rate close to 4 percent isn't nearly as restrictive as you might have thought.
    
    Policy also has to account for headwinds and tailwinds hitting the economy. Elevated asset valuations and compressed credit spreads aren't just indications that policy most likely isn't very restrictive. They're also indications that the fed funds rate needs to offset tailwinds from financial conditions.
    
    Putting it together, even in September I was not certain we had room to cut rates more than once or twice and still maintain a restrictive stance. And having made two cuts, I'm not certain we have room for more. Monetary policy works with a lag. It's too soon to directly assess the degree of restriction from the current stance of policy, with two rate cuts already on board. In the absence of clear evidence that justifies further easing, holding rates steady for a time would allow the FOMC to better assess the degree of restriction from current policy. Taking the time to learn more can help us avoid unnecessary reversals that might generate unwanted financial and economic volatility.
    
    
  • Tilt: Hawkish

Anna Paulson

• November 20, 2025: Economic Outlook
  
  
  • So, with upside risks to inflation and downside risks to employment, monetary policy has to walk a fine line. In my judgement, the 25-basis-point rate cuts at the September and October meetings were appropriate and have helped to keep policy on that line. But each rate cut raises the bar for the next cut. And that’s because each rate cut brings us closer to the level where policy flips from restraining activity a bit to the place where it is providing a boost. So, I am approaching the December FOMC cautiously.
    
    On the margin, I’m still a little more worried about the labor market than I am about inflation, but I expect to learn a lot between now and the next meeting. And, as I think about monetary policy over the longer arc, I’ll be focused on how to appropriately balance the risks to both inflation and the labor market, guided by my commitment to deliver on the FOMC’s price stability mandate and get inflation all the way back to 2 percent.
    
    
  • Tilt: Hawkish

John Williams

• November 21, 2025: Navigating Unpredictable Terrain
  
  
  • I fully supported the FOMC’s decisions to reduce the target range for the federal funds rate by 25 basis points at each of its past two meetings.
    
    Looking ahead, it is imperative to restore inflation to our 2 percent longer-run goal on a sustained basis. It is equally important to do so without creating undue risks to our maximum employment goal. I view monetary policy as being modestly restrictive, although somewhat less so than before our recent actions. Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievement of our two goals. My policy views will, as always, be based on the evolution of the totality of the data, the economic outlook, and the balance of risks to the achievement of our maximum employment and price stability goals.
    
    
  • Tilt: Dovish

Briefing.com Analyst Insight

There is one more FOMC meeting to be held this year. It will take place December 9-10. Leading up to Thanksgiving week, there was less than a 40% probability of a 25-basis-point cut at the December meeting. That view changed overnight, though, when New York Fed President Williams, viewed by many as Fed chair Powell's policy ally, said he sees room for a further adjustment in the near term to the target range for the federal funds rate to move closer to the range of neutral.

The probability of a rate cut in December spiked above 80% after that remark and is currently at 87.2%, which, for many, means a rate cut is a forgone conclusion.

It is not a foregone conclusion, however, that replacing Jerome Powell as Fed chair will instantly lead to lower interest rates. That is true for the policy rate as much as it is for market rates. It is possible that a new Fed chair, bent on arguing the case to cut rates, stokes inflation concerns that drive up long-term rates, which the Fed does not control.

It is also possible that other FOMC members balk at additional rate cuts, particularly if inflation accelerates. That could push short-term rates higher if the market thinks the higher inflation will prevent additional rate cuts.

We know that at least three of the voting bank presidents for 2026 have a hawkish tilt at this juncture. Minneapolis Fed President Kashkari has a more neutral stance going into the December meeting, but we'd say he leans hawkish knowing that he did not support the cut made at the October FOMC meeting and that PCE inflation remains close to 3.0%.

From our vantage point, 2026 has the makings of being a topsy-turvy year when it comes to the market divining policy moves. That is because the composition of the FOMC in the first half of the year won't be the same in the seond half of the year.

That thought is predicated on the idea that (1) there will be a new Fed chair (2) current Fed chair Powell will resign his governor position (3) the governor position held by Stephen Miran will be assumed by another nominee of President Trump, assuming Mr. Miran doesn't keep the post, and (4) the possibility that the Supreme Court rules that President Trump has the power to fire Fed governor Lisa Cook, which opens the door for the president to nominate someone else to the Board of Governors.

That would leave the governor's class with a predominately dovish disposition, which matters greatly because there are seven of them and only five voting bank presidents. That would make it easier presumably for a new Fed chair to forge a consensus that favors rate cuts.

The economic conditions on the ground will change, of course, so it isn't a given that the governors will always coalesce around the need to cut rates. It's just that, with a governor class that tilts dovish, the bar for a rate cut, certainly in the back half of the year, will be lower, all else equal.

According to the CME FedWatch Tool, the fed funds futures market expects two rate cuts in 2026: one in April and another in September based on a probability line that exceeds 50.0%.

Come January, four new voting presidents will be locked in with voting authority, but it looks like it will ultimately be the governors calling the shots as the year unfolds.

--Patrick J. O'Hare, Briefing.com