In a few weeks, Federal Reserve Chair Janet Yellen passes the baton to President Trump’s selection. Jerome (Jay) Powell will chair the first meeting of 2018 at the end of January. While some expect changes to Federal Reserve policy in 2018, the only thing that will be different are the players in the seats.

Currently, there are four slots taken on the Board, three openings, one permanent voter and a retirement coming some time this year (William Dudley, the Chair of the NY Fed).

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This first meeting of the year will have four of the seven voting members rotating in as voters. Leaving are Neel Kashkari, Charlie Evans, Patrick Harker and Bob Kaplan (thought they will still attend meetings and provide valuable input). New voters include Loretta Mester, John Williams, Raphael Bostic and the acting Richmond Fed President (the seat is currently open).

Changes on the horizon

The voting members will shift the board to a bit of a hawkish slant in 2018; Mester and Williams side with a more aggressive rate hike policy. However, new Chairman Jay Powell is likely to be a consensus builder as he is more to the center than Yellen, who many viewed as modestly dovish.

The policy is pretty firm for 2018 unless there is a significant uptake to inflation. The markets are sniffing out good economic growth ahead (4% or better). The bond market is seeing it too, but we don’t have a mass exodus from bonds. This tells me the best scenario for the Fed is going to take hold: strong growth driven by productivity gains and only mildly higher inflation.

The Fed is on record as stating they will likely raise rates three or four times in 2018. I believe three is the likely scenario as the market has started to price that in. That would still leave the Fed Funds below a neutral zone, so even at 2.25% (target at end of 2018), Fed policy would still be considered accommodative.