To keep things manageable, only the seven Fed governors, the president of the Federal Reserve Bank of New York and the other regional reserve bank presidents, who rotate each year, can vote to lower (or raise) interest rates. This makes a lot of sense because it ensures that every region of the country has a voice, and it keeps the size of the meeting and deliberations manageable and prevents the meeting from turning into a debating club.
Imagine the next Fed meeting. The seven Federal Reserve governors and the five voting presidents of the regional reserve banks must decide whether or not to cut interest rates. And then there are the other seven regional reserve bank presidents who attend the meetings but have no vote. As you can guess, it is extremely important who votes and who does not.
Vyacheslav Fos and Nancy Xu of Boston College noticed something important in their study. Inflation and unemployment are not constant in the United States, and regional Reserve Bank presidents are naturally more influenced by economic conditions in their area of the country than others. This means that if, by chance, the voting members of the FOMC are all from low-inflation areas of the country, while the non-voting members are from higher-inflation areas, the Fed's decision is likely to be tilted in favor of a rate cut, even though such a rate cut may not be optimal from a national perspective.
Your initial reaction may be: so what? Regional members rotate, so while this may temporarily move the Fed Funds rate up or down, in the long run the impact should be relatively small. This is not true, however, because regional members do not always have the same choices.
