Federal Reserve's FOMC getting three hawks, one dove in 2025

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The Federal Reserve’s rate-setting Federal Open Market Committee will rotate four new voting members onto the board for next year, with three seen as hawks.

The new 2025 voting members will include Boston Fed President Susan Collins, Chicago Fed President Austan Goolsbee, St. Louis President Alberto Musalem, and Kansas City Fed President Jeffrey Schmid.

According to InTouch Capital Markets, Goolsbee is the only dove of the four. The firm ranks Collins and Musalem as slightly hawkish while Schmid is moderately hawkish.

Goolsbee said on December 20 that recent economic data made his projected path for interest rates in 2025 a little more shallow due to a “little more uncertainty” and noise in recent economic data.

"I've been saying that the overall thread is that inflation is way down. I believe we're on the path to 2%, and over the next 12 to 18 months, rates can still go down a fair amount," he said in an interview on CNBC. "Whether that happens three months earlier, or three months later, I don't think is the most material thing."

The FOMC’s latest Summary of Economic Projections published on December 18 showed that members expect the pace of rate cuts to slow next year and beyond as inflation remains sticky.

With the benchmark federal funds rate ending this year at 4.25% to 4.5%, the latest SEP shows 50 basis points of rate cuts in 2025, according to the median projection, down from the previous estimate of 100 basis points.

The median policy rate is seen dipping to 3.4% in 2026 and 3.1% in 2027.

Meanwhile, the FOMC expects 12-month personal consumption expenditures inflation to close 2025 at 2.5%, before sliding to 2.2% in 2026, and 2% in 2027.

Also, the unemployment rate is seen at 4.3% through 2027.