Do the Voting Rights of Federal Reserve Bank Presidents Matter?

Abstract

Voting seats at FOMC meetings rotate between Reserve Bank presidents on a yearly basis. Using detailed data on 488 FOMC meetings that took place between 1969 and 2021 and predetermined rotations of voting rights, we show that economic conditions in Reserve Bank presidents' districts affect Federal funds target rates only when those presidents hold voting seats at FOMC meetings. Federal funds futures reflect this effect of local economic conditions on FOMC decisions. Supporting the voting mechanism, we show that voting presidents dissent based on economic conditions in their districts. Reserve Bank presidents' districts are more likely to be mentioned in FOMC transcripts than are the districts of non-voting presidents. Finally, we show that the path of the target rate would have been different if economic conditions in all districts affected FOMC decisions.

Keywords: Federal Reserve System, monetary policy, FOMC, voting rights, Reserve Bank presidents

JEL Classification: E52, E58, D7, G1