The composition of the Federal Reserve's interest rate-setting committee is about to change, and at the same time, renewed inflation concerns are making central bank decision-making more complicated.

Earlier this month, the Federal Reserve lowered the benchmark policy interest rate by 25 basis points and hinted that there will only be two rate cuts in 2025. Chairman Jerome Powell clearly stated that the central bank is entering a new phase, with future rate cuts likely to be more gradual and dependent on whether inflation declines.

I believe this sends a very strong signal that a rate cut is unlikely in January, said Goldman Sachs chief economist Jan Hatzius. Besides, the data is the real driving factor.

In addition to the seven members of the Federal Reserve Board and the president of the New York Fed, the presidents of the 11 regional Federal Reserve Banks will also take turns voting on interest rate decisions in the Federal Open Market Committee (FOMC).

In 2025, Boston Fed President Susan Collins, St. Louis Fed President Alberto Musalem, Kansas City Fed President Jeff Schmid, and Chicago Fed President Austan Goolsbee will have voting rights on the committee. Nevertheless, non-voting officials will still participate actively in the policy discussions at each meeting.

For the newly restructured committee, a key question is: how quickly should policymakers lower interest rates while inflation remains above the Federal Reserve's 2% target?

The discussions among Federal Reserve officials may become complicated by a series of potential policy changes under President Donald Trump. Some economists anticipate that Trump's plans to raise tariffs, deport millions of immigrants, and cut taxes could drive up inflation and restrict the labor market.

In recent months, there have been two decision-makers who expressed dissent in the votes. Federal Reserve Governor Michelle Bowman voted against the decision to cut rates by 50 basis points in September, preferring a smaller rate reduction. Cleveland Federal Reserve President Beth Hammack supported holding steady at the December meeting.

Bloomberg Economic Research Perspective:

Bloomberg Economic Research expects more divergence in the FOMC in 2025. We assess the voting members of the committee along the hawk-dove spectrum and find that opinions among the FOMC voting members will intensify next year, with viewpoints spread across both ends of the spectrum and less concentrated in the middle.

— Anna Wong, Chris Collins, and Eliza Winger

Don Kohn, a senior fellow at the Brookings Institution and former vice chairman of the Federal Reserve, stated that if the committee faces tricky policy issues leading to more dissent next year, it may not necessarily be a bad thing.

"I don't think there's a problem with occasional dissent," Kohn said. "I believe the public should feel reassured that different views are heard within the committee."

In addition to Hammack, other Federal Reserve officials who will lose their voting rights in 2025 due to personnel rotation include San Francisco Fed President Mary Daly, Richmond Fed President Tom Barkin, and Atlanta Fed President Raphael Bostic.

Here are the recent views expressed by Federal Reserve officials who will have voting rights next year:

Alberto Musalem

He will serve as the President of the St. Louis Federal Reserve starting in April 2024.

This will be Musalem's first voting at the FOMC.

Alberto Musalem

Musalem has consistently supported a patient approach to interest rate cuts. He noted that the inflation data since September suggests an increased risk of a "stall or even reversal" in the inflation reduction process before the Federal Reserve releases its latest interest rate decision in early December.

"It may be close to the time to consider slowing the pace of interest rate cuts or pausing, in order to carefully assess the current economic environment, the upcoming information, and the changing outlook," he stated.

Jeff Schmid

Has served as President of the Kansas City Federal Reserve since August 2023.

This will be Schmid's first vote at the FOMC.

Schmid emphasized that there is uncertainty about what level interest rates will ultimately stabilize at. Officials generally believe that policy is restrictive for the economy, given that the Federal Reserve's benchmark interest rate is above most estimates of the neutral rate. However, there are still differences regarding the extent of rate cuts needed to reach a neutral level.

Schmid stated that slowing the pace of rate cuts will allow officials to discover this.

"While I support loosening policy restrictions, I tend to avoid making large moves, especially considering the uncertainty surrounding the ultimate destination of policy, and I want to avoid fueling volatility in financial markets," Schmid said on October 21.

Susan Collins

Has served as President of the Boston Federal Reserve since July 2022.

Collins last served as a voting member of the FOMC in 2022.

Susan Collins.

Collins stated in November that, while it is uncertain where the terminal rate will land, further easing of policy is still necessary. She reiterated that rates are not on a preset path and described the economic situation as "generally good."

"The policy adjustments made so far have allowed the FOMC to work calmly in the future, taking time to thoroughly assess the impact of existing data on the outlook and balance of relevant risks," she said.

Austan Goolsbee.

Has served as President of the Chicago Fed since January 2023.

Goolsbee last served as a voting member of the FOMC in 2023.

Austan Goolsbee.

Goolsbee has repeatedly stated that he believes the Federal Reserve's policy stance is far above neutral. He reiterated this view after the rate cut in December.