In a few hours, the Federal Open Market Committee will convene a meeting. Do you know the names of the twelve members? Can you name one member? Two? Eight?
Do you know their schedule? Do you know their agenda? Please allow me to assist you since there is so much misinformation about the monetary policy of the U.S. Government.
There are seven members of the Board of Governors of the Federal Reserve System. Each member is appointed to a fourteen year term by the President of the U.S. and approved by the U.S. Senate. One Board member’s term expires once every two years. So President Trump will get the opportunity to appoint a member to the Federal Reserve Board very soon. ( Working 14 hours a day is a realistic excuse for President Trump’s failure to fill all vacancies on the Federal Reserve Board of Governors. )
Presently there are only five confirmed members of the seven person Federal Reserve Board. They are: 1) Janet Yellen ( Chairperson ), 2) Stanley Fischer ( Vice Chair ), 3) Daniel Tarullo, 4) Jerome Powell, and 5) Lael Brainard. Seat 6 is vacant. Seat 7 is vacant.
The Federal Open Market Committee ( FOMC ) consists of the seven members of the Board of Governors of the Fed plus five Federal Reserve Bank Presidents. The President of the New York Fed is always one of the five members of the Open Market Committee. So, the FOMC consists of the seven Board Members of the Fed plus the Bank President of the New York Fed plus four other Fed Bank Presidents.
Besides the seven Fed Board members, the FOMC in 2017 will have 1) William Dudley of the New York Fed, 2) Charles Evans of the Chicago Fed, 3) Patrick Harper of the Philadelphia Fed, 4) Robert Kaplan of the Dallas Fed, and 5) Neel Kashkari of the Minneapolis Fed at all FOMC meetings in 2017.
So, the FOMC will have five board governors plus the five Fed Presidents. That gives a total of ten members. Will the FOMC meet with just ten members or will the Fed use one or two of the Alternate members?
Strange that the Fed did not state the names of members of the FOMC before the March 14-15/2017 meeting. We know ten of the FOMC members. Are they going with just ten or will they add one or two alternates? Sanityandsense.com has long contended that the composition of the Board of Governors of the Federal Reserve System is far more important to the American People than the composition of the U.S. Supreme Court.
The result of the FOMC meetings of 3/14 and 3/15 will probably be an increase in an interest rate of 25 basis points or 0.25%. This small increase in an interest rate controlled by the Fed will result in how investors all around the world view the wisdom of buying our debt. Our debt is sold in short term obligations called T-Bills. Our debt has longer term instruments called T-Bonds of various time parameters. For example, a T-Bond with a ten year maturity will have a different interest rate than a T-Bond with a 20 year maturity.
Also, some stocks pay dividends. When interest rates rise, investors usually want higher stock dividends or they will pay less for the stock.
Additionally, the Bank of England and the Bank of Japan are also having meetings this week ! The BOE and the BOJ also have the right to modify their interest rates.
Since a small increase in one interest rate like 0.25% can have such profound effects on the U.S. economy and the world economy, do you believe that the members of the Board of Governors and the members of the Federal Open Market Committee are the best qualified individuals to make this important decision?
R. Van Conoley