It was about this time last year that we noted how the voting membership of the FOMC would become more dove-ish in 2012. Of course, at the time we had no idea that Jeremy Stein and Jerome Powell would be appointed and confirmed this year, making the committee even more receptive to Ben Bernanke's decisions. Surely this made it easier, at least on the margins, for Bernanke to move in the direction of Evans/Woodford/Sumner, which he finally did at the big September meeting (also helping was what appeared at the time to be another post-winter slowdown in the US economy). As Tim Duy wrote a while back, the helpful chart breakdown from Credit Suisse economists was in need of an update after Narayan Kocherlakota abandoned his earlier view that the recovery's sluggishness was largely a structural issue - and then advocated his own variation of an Evans Rule. Here's the updated version of the Credit Suisse breakdown, click to enlarge: The dove-hawk spectrum is an imperfect way to understand the FOMC, as the definitions of "dove" and "hawk" can vary according to circumstances. Right now the use of these terms refers to something like inflation-tolerance, but also to tolerance for Bernanke's willingness to use unconventional policies to pursue the Fed's objectives. And for that matter, to his willingness to change the objectives themselves. So with the needed caveats in mind... As you can see above, the Fed presidents who will lose their votes next year are Lacker, Lockhart, Pianalto, and Williams - respectively an uber-hawk, two mild doves and an uber-dove. Replacing them next year will be George, Bullard, Evans, and Rosengren - respectively a mild hawk, a Bullard, and two uber-doves. We don't categorise Bullard because he's been difficult to predict in the past, having favoured (and voted with the consensus for) QE2 in 2010 - but then voicing his displeasure over QE3 last year and, in particular, arguing against anything that smacks of NGDP targeting. George is Thomas Hoenig's replacement, and it is likely though uncertain that she'll be a dissenting vote next year. Even if both George and Bullard become dissenters (and dissents have been uncommonly numerous through the Bernanke chairmanship) we doubt policy will be much influenced. At most it would represent a negligibly small hawkish change in the FOMC composition. But remember that one of Bernanke's signal accomplishments at the September meeting was to protect against a hawkish shift in policies into the future and despite such personnel rotations. Which makes it puzzling that earlier this week, Charles Evans gave a speech in which he said this: In the past, I have said we should hold the fed funds rate near zero at least as long as the unemployment rate is above 7 percent and as long as inflation is below 3 percent. I now think the 7 percent threshold is too conservative. Our latest actions put us on a better policy path than we had when I first proposed the 7/3 markers a year ago. At the same time, there still are few signs of substantial inflationary pressures. If we continue to have few concerns about inflation along the path to a stronger recovery there would be no reason to undo the positive effects of these policy actions prematurely just because the unemployment rate hits 6.9 percent - a level that is still notably above the rate we associate with maximum employment. This logic is supported by a number of macro-model simulations I have seen, which indicate that we can keep the funds rate near zero until the unemployment rate hits at least 6-1/2 percent and still generate only minimal inflation risks. Even a 6 percent threshold doesn't look threatening in many of these scenarios. But for now, I am ready to say that 6-1/2 percent looks like a better unemployment marker than the 7 percent rate I had called for earlier. The context here is that at some point, Bernanke may try to lead the FOMC to change its calendar-based approach of projecting when rates will eventually rise, to an approach that uses such targets. How probable that is, we're not really sure. Equally unclear to us is whether specific targets will be adopted to determine the pace of large-scale asset purchases, which are currently open-ended and which will continue at least until the Fed sees "substantial" improvements in labour markets. Evans defines this as "increases in payrolls of at least 200,000 per month for a period of around six months" and real GDP growth above the economy's potential. Tim Duy and Ryan Avent have smart posts about the speech, but the basic concern is that Evans's decision to move from 7-and-3 to 6.5-and-2.5 reflects a broader shift in sentiment within the FOMC towards less tolerance for temporarily higher inflation in an accelerating recovery. We don't know whether that's true or not, but this seems like a strange decision either way. If the FOMC as a whole is becoming less inflation-tolerant, then surely it would be helpful to Bernanke that someone defend his left flank (a post that Evans has guarded the last few years)? After all there's nothing stopping Evans from voting in favour of Bernanke's decisions while also calling for them to be still more aggressive. And if the FOMC remains as inflation-tolerant as it has appeared to be at the last two FOMC meetings, then why bother? Especially given that next year's voting membership will be roughly as accomodating as this year's... Related links: Despite all their rage, still just hawks in a cage - FT Alphaville The Fed's dissenters - FT Alphaville Dove, actually - FT Alphaville