In 2017, the FOMC participants forecasted three rate hikes from the US Federal Reserve. But a majority of the economists and financial market participants are betting on two. We forecasted two hikes from Fed this year along with a decision on balance sheet reduction. In one of our previous articles, named “Fed hike Aftermath Series: How FOMC policy board looks in 2017?” we discussed the views of the current board members. Based on the previous commentaries, we tagged 6 of the 10 policymakers as doves, 2 of them as hawks and 2 of them unknowns. In a subsequent article, after hearing out some of the policymakers, we changed those combinations to 5 doves, 4 hawks, and 1 unknown.

After hearing out Federal Reserve chair Janet Yellen last night, we believe another change is due to our board. Last night Federal Reserve chair despite favoring gradual rate hikes surprised the financial market participants by saying, ““Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road……either too much inflation, financial instability or both.” She added that delaying rate hikes could eventually force the Fed to increase rates rapidly to catch up.

With such comments, we would prefer to move the chair from dovish camp in our board to a hawkish one and the latest board looks like,

Doves – Lael Brainard, William Dudley, Daniel Tarullo, and Neel Kashkari.

Hawks – Janet Yellen, Charles Evans, Patrick Harker, Stanley Fischer, and Robert Kaplan

Unknown – Jerome Powell