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No matter who would be Fed chair next year, the central bank is expected to become a much more hawkish institution.
The Fed begins a two-day meeting Tuesday, a meeting that is expected to be uneventful but is occurring just before President Donald Trump names a new Fed chair Thursday to replace Janet Yellen.
It is widely expected he will name Jerome Powell, a Fed governor, first appointed in 2012. Also in the running were John Taylor, the Stanford University economist, viewed as much more hawkish because of his rules-based formula for raising interest rates, and Kevin Warsh, a former Fed governor and associate of Taylor.
The Fed is not expected to take any actions when it releases its statement Wednesday, though it could point the markets toward the rate hike expected at its December meeting.
"I think they'll keep their options open. They have been very careful to keep their options open. … I think the fact that [the rate hike] is already priced in to the market means they don't have to work hard to get things where they want them," said Stephen Stanley, chief economist at Amherst Pierpont. "I would say that it's 'don't rock the boat.'"
The Fed may also make a comment on the impact of hurricanes on the economy and the lack of inflation it is seeing, but the market talk around the Fed meeting will be about Yellen's replacement and who else might join the Fed board.
Strategists say Powell may surprise since he's not that well known, but he is expected to be more like Yellen than the other two candidates and keep the Fed on a slow hiking pace. His appointment is not likely to move markets much since he is expected to bring consistency.
But Yellen, seen as the chief dove for most of her term, lately is being seen as more of a hawk, moving toward rate hikes even in the face of low inflation.
"The reality has changed too. You have a 4.2 percent unemployment rate, and that's got a number of people, including Yellen, a little concerned about the possibility of the economy overheating even though inflation is low," said Stanley.
"You look at Yellen's approach this year, versus 2015 and last year. It's clearly very different," he said. "The other piece of that is the fact financial conditions are so easy. They're concerned about that as well — the fact they're raising rates and not getting any traction."
Even though Powell has been on the Fed, some Fed watchers say he is still rather unknown.
"I just feel like we don't have any clue about what Powell thinks," said Stanley. "He has just toed the company line his entire tenure on the board. There's been a little wisp of things that he was going to do this or try to do that.
"We know exactly what Taylor thinks. We know what Warsh thinks. We know what Yellen thinks. We don't know what Powell thinks. He's been a loyal Fed governor," said Stanley. "Fed governors don't publicly diverge from the chair anymore. You have to go back a long way to find that. It used to be normal."
Stanley said Fed governors have a "circle the wagons" mentality post-financial crisis, and they are also well aware the Fed is under political scrutiny.
This week's meeting will be the first for Trump's first appointment to the Fed. Randal Quarles was confirmed as Fed vice chair for bank supervision in October.
Trump will also be naming others to the Fed eventually, and speculation is circulating that Taylor could be tapped for Fed vice chairman. Two other seats would also be empty, and Trump's picks are expected to be more hawkish than the current board members.
There is also a change in voting members next year, and for instance, two dovish presidents —Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari — are no longer voting.
"There are still vacancies to fill. I don't think the guidance we get from the Fed is worth a whole lot at this point because of the potential personnel shifts. I assume she's still going to be chairman when they meet in December, so that's the only meeting we're really focused on," said Tom Simons, money market economist at Jefferies.
Besides the Fed Tuesday, there is a batch of data, including the employment cost index at 8:30 a.m., S&P Case/Schiller home price index at 9:00 a.m., Chicago PMI at 9:45 a.m., and consumer confidence at 10 a.m.