04 18 2017 | by Victor Xing | Capital Markets
02 17 2017 | by Victor Xing | Economics
Looming risks through the prism of bifurcated housing market
01 11 2017 | by Victor Xing | Economics
Financial risk contagion: China’s capital outflow
12 22 2016 | by Victor Xing | Economics
November PCE: dollar strength weighed on goods inflation
12 14 2016 | by Victor Xing | Central Banks
A less-hawkish interpretation of the December FOMC
12 02 2016 | by Victor Xing | Economics
November Payrolls and Governor Powell on risk management
11 15 2016 | by Victor Xing | Central Banks
November FOMC minutes and debates behind guidance change
11 04 2016 | by Victor Xing | Economics
October Payrolls: decent data with stronger wage growth
11 02 2016 | by Victor Xing | Central Banks
November FOMC: forward guidance and the return of “some”
11 01 2016 | by Victor Xing | Economics
September PCE: goods and energy inflation lead the index
11 18 2015 | by Victor Xing | Central Banks
How does Bank of England’s MPC differ from FED’s FOMC?
There exists significant differences between Federal Reserve’s(FOMC) vs. central banks following a system similar to Bank of England’s (MPC)
Bank of England
First, policy decisions by Bank of England MPC are by majority rule of its voters with Governor’s vote as a tie-breaker (please see source 1 below). There are currently five internal members (Governor, three Deputy Governors, and Chief Economist) and four external members (they are appointed directly by the Chancellor) to reflect independent views outside Bank of England.
The Monetary Policy Committee – decision by majority vote with Governor Carney (front, 2nd from the right) as a the tie-breaker
Source 1:. Please note the article is somewhat out of date – the BOE has moved to release MPC Minutes on the same day of policy decisions and inflation reports.
The Federal Reserve
The Federal Reserve is an unique central bank. It is true that there are voters, but not all votes are the same. The five membersare permanent voters, and this will again become a seven member group once the Senate confirms and to fill the remaining two vacancies (the Board may possibly become an eight member group: ).
President of the Federal Reserve Bank of New York is also a permanent voter (and Vice Chair of the FOMC), a position that reflects the bank’s strategic role in conducting open market operations via its.
The remaining four voters are rotated amongst other Federal Reserve Bank Presidents.
Most importantly, the votes are there to express whether voters agree or disagree with the decision by the Committee, whatever it may be. It is more of an expression of “approve” or “disapprove” after the fact. Since these are not votes for or against a predefined policy, such as BOE’s votes on interest rates, there is no need for the FOMC to have a tie-breaker. Also, five dissents at the FOMC would only signal serious erosion of the FED Chair’s credibility (unable to bring policymakers toward a common consensus)
Finally, President of the New York Fed and Governors of the Federal Reserve Board are considered part of the Chair’s “inner circle” – and the FED Chair will likely push for a policy path agreeable to these policymakers. In the FED’s “dot plot” of year-end funds rate target level, the “clump” usually represents the FED Chair’s “dot,” together with the Governors’
In conclusion, voting at the FOMC is a final expression after process of deliberation and consensus building by the FED Chair. 5:5 vote is a sign that the FED Chair and a small group of policymakers forcefully pushed an unpopular policy forward, but there is little the dissenters can do about that.
More context regarding FOMC dissenters
Language in the December FOMC Statement regarding the three dissenters (they voted against the policy action specified in the FOMC Statement):
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Stanley Fischer; Loretta J. Mester; Jerome H. Powell; and Daniel K. Tarullo.
Voting against the action were Richard W. Fisher, who believed that, while the Committee should be patient in beginning to normalize monetary policy, improvement in the U.S. economic performance since October has moved forward, further than the majority of the Committee envisions, the date when it will likely be appropriate to increase the federal funds rate; Narayana Kocherlakota, who believed that the Committee’s decision, in the context of ongoing low inflation and falling market-based measures of longer-term inflation expectations, created undue downside risk to the credibility of the 2 percent inflation target; and Charles I. Plosser, who believed that the statement should not stress the importance of the passage of time as a key element of its forward guidance and, given the improvement in economic conditions, should not emphasize the consistency of the current forward guidance with previous statements.
FED Chair Yellen responded to questions regarding three dissents at the December 2014 FOMC:
[Peter Cook, Bloomberg Television] And if I could follow up just separately on the dissents at this meeting. There were three dissents, a notable number, certainly. What does that suggest about the debate around the table and your ability to forge consensus going forward? Are you disappointed with the number of dissents?
CHAIR YELLEN. So let me start with the number of dissents. There is a wide range of opinion in the Committee. I think it’s appropriate for people to be able to express their views. And, in a sense, you see dissents on both sides. I think the statement does a good job of reflecting what the majority of the Committee thinks is appropriate policy. So at—you know, at a time like this, where we are making consequential decisions, I think it’s very reasonable to see divergences of opinion.
Next article11 17 2015 | by Victor Xing | Economics