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The Week Ahead: Fed's First Meeting of 2011

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Next week, when the FOMC statement is released on Wednesday afternoon, economists say that the most significant development will be the vote count given the new mix of voting FOMC members in 2011.

Deutsche Bank’s Joseph LaVorgna notes that there will be four new regional bank presidents who become voting members of the Committee at the January meeting.

With the departure of one dove (Rosengren), two moderates (Pianalto/Bullard) and a hawk (Hoenig), the rotation of regional bank presidents becomes discernibly more hawkish in 2011 with the arrival of one dove (Evans), one moderate (Kocherlakota) and two hawks (Fisher/Plosser).

The question is whether these more hawkish members of the FOMC -- worried as they are about the inflationary impact of all this monetary experimentation -- will dissent, as Hoenig did, in favor of less accommodative policy.

Richard Fisher, the President of the Dallas FRB, recently spoke in NYC about the limits of monetary policy. He said, “I have been outspoken about the limits of monetary policy as a salve for the nation’s fiscal pathology.” Fisher warned that with QE2, “we have run the risk of being viewed as an accomplice to Congress’ fiscal nonfeasance.” (Hat tip: Yardeni Research).

For his part, LaVorgna said in a research note today that he now anticipates a unanimous vote—at least in January.

“Our sense is the hawks perceive they will carry more clout by wielding the prospect of dissention later in the year, when QE is set to expire and emerging inflation pressures will be more apparent,” the economist wrote.

LaVorgna highlights the breakdown of 2011 FOMC members in what he call his “hawk-o-meter” below:

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