Washington
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President Donald Trump could announce his nominee for the next Federal Reserve chair as soon as this week, and has signaled that his pick must push for significant interest rate cuts. But whoever he chooses will face a new policymaking committee — and one that could be even more resistant to slashing rates.
At the beginning of each year, four out of the 12 regional Fed presidents rotate into voting roles on the central bank’s influential rate-setting committee for the next eight policy meetings. This year, it’s Lorie Logan of Dallas, Beth Hammack of Cleveland, Anna Paulson of Philadelphia and Neel Kashkari of Minneapolis. The New York Fed president and all seven members of the Fed’s Board of Governors, including the Fed chair, have a permanent vote.
In their latest public comments, Logan and Hammack have both expressed concern that this is the fifth consecutive year that inflation is hovering above the Fed’s 2% target.
That means they are unlikely to vote for a rate cut in the near future, since that could fuel spending and add to price pressures.
Fed officials convene for their first meeting of the year on Tuesday and Wednesday, and they’re widely expected to keep rates unchanged.
In December, Fed officials projected just one rate cut for 2026.
Investors and economists describe central bankers who support policies that are tough on inflation as “hawks,” while those who are more concerned about the labor market are referred to as “doves.” That makes hawks less likely to support rate cuts, unlike the doves on the committee.
The Fed is tasked by Congress to stabilize prices and promote full employment, a balancing act that became complicated after Trump unleashed a sweeping economic agenda last year that threatened both of those goals simultaneously.
While a weaker labor market led to the Fed lowering rates three times last year, Trump’s tariffs — and possibly additional levies — could still push inflation higher, making it difficult to argue the Fed should lower rates more than once this year.
Hammack could be the committee’s most hawkish voice this year, stating in a Wall Street Journal interview from December 21 that rates “can stay here for some period of time until we get clearer evidence that either inflation is coming back down to target or the employment side is weakening more materially.”
“I’m very focused on making sure that we can get inflation back to target. That is one of our primary objectives and it’s important that we complete the job,” she said.
Logan is also considered a hawk, and suggested she would have cast a dissenting vote on the Fed’s December decision to lower its benchmark lending rate for the third consecutive time by a quarter point. She stated in her latest interview on November 21 that “holding rates steady for a time would allow the (policymaking committee) to better assess” how recent rate cuts are affecting the economy.
In December, Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee cast dissenting votes on the Fed’s decision to cut rates in December, preferring to keep them unchanged instead.
Regional Fed presidents, who are more insulated from political pressures and who see local economic conditions closer up, are historically more likely to break with the majority vote than the Washington-based Fed governors.
Paulson, in contrast, might arguably be the most dovish Fed president on the committee this year, signaling greater openness to rate cuts.
In a January 14 speech, Paulson said she’s “cautiously optimistic on inflation,” describing the potential effects of tariffs as limited and expects a “decent chance that we will end the year with inflation that is close” to the Fed’s 2% target.
The labor market isn’t expected to fall off a cliff this year, Paulson said, but that shouldn’t keep the Fed from lowering interest rates at least once in 2026.
“I see inflation moderating, the labor market stabilizing and growth coming in around 2 percent this year,” Paulson said. “If all of that happens, then some modest further adjustments to the funds rate would likely be appropriate later in the year.”
Paulson’s views are more in line with Fed governors Christopher Waller and Michelle Bowman, but not quite as extreme as Fed Governor Stephen Miran, who continues to say the economy is at risk of a recession if the Fed does not deliver massive rate cuts.
Kashkari’s stance has been more in the middle, stressing that there continues to be a twin threat to the Fed’s dual mandate.
“The inflation risk is one of persistence — that these tariff effects take multiple years to work their way all the way through the system — whereas I do think there’s a risk that the unemployment rate could pop from here,” he told CNBC in a January 5 interview.
Trump has made clear what he wants from his Fed chair. But while the president may gain an influential leader who shares his desire for lower rates, the new Fed chief remains just one vote on a 12-person committee that will continue to make rate decisions guided by the economic reality.
