Division at the US Federal Reserve has intensified in the past few weeks, with officials staking out disparate positions ahead of the central bank’s policy meeting next month — all while Fed Chair Jerome Powell stays silent.
The drama was amped up on Friday when New York Fed President John Williams, sometimes seen as a proxy for the Fed chief, signaled his support for a rate cut after several other policymakers came out leaning against one.
Powell himself has not spoken publicly since the central bank’s last rate decision on Oct. 29, but a tally of recent remarks suggests the other voting members of the rate-setting Federal Open Market Committee (FOMC) are nearly evenly split over what to do, all but ensuring some would vote against the Dec. 10 decision regardless of the outcome.
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Once a rarity under Powell, dissents have increased this year. As officials wrestled with competing objectives of supporting a flagging labor market and keeping inflation in check, there has not been a unanimous vote since June. The US government shutdown, which delayed several key economic data releases, further complicated their ability to agree on which goal to prioritize.
The Fed has long prided itself on making rate decisions by consensus, and it has been a hallmark of Powell’s tenure at the helm, which began in 2018 and is set to conclude in May next year.
The resulting low number of dissenting votes at the Fed’s eight annual policy meetings telegraphs confidence in their decisions, and some research suggests it ensures clear and effective communication of the committee’s intentions. However, critics argue it also leads to “group-think” that suppresses potentially important arguments.
“On the group-think thing, people who are accusing us of this, get ready. You might see the least group-think you’ve seen from the FOMC in a long time,” Fed Governor Christopher Waller said on Monday.
Waller dissented from the Fed’s decision to hold rates steady in July along with his colleague Michelle Bowman — the first time two Fed governors had voted against the chair in 32 years.
At the following meeting in mid-September, Fed Governor Stephen Miran — who joined the Fed board that month after being nominated by US President Donald Trump — voted against his colleagues’ decision to lower rates by a quarter point, instead favoring a bigger rate reduction.
At the Fed’s Oct. 28-29 meeting, Miran dissented again for the same reason, while Kansas City Fed President Jeff Schmid dissented in the opposite direction. Schmid wanted to hold rates steady, arguing that further cuts could reignite inflation.
That is a sentiment that has been expressed by more Fed policymakers in the weeks since. Five of the 12 officials who vote on policy this year have indicated they are leaning toward keeping rates on hold next month.
“We need to be careful and cautious now about monetary policy,” Fed Governor Michael Barr, who in the past has leaned toward providing support for the labor market, said last week.
Other past doves have also indicated they might be more comfortable holding rates steady next month. They include Chicago Fed President Austan Goolsbee, who has not dissented in his nearly three years at the Fed, but said he would if he felt like he needed to.
“If I end up feeling strongly one way, and it’s different from what everybody else thinks, then that’s what it is. That’s fine. I think that’s healthy,” Goolsbee said on Thursday in a call with reporters. “I don’t think there’s anything wrong with dissenting.”
He acknowledged there have been more dissents this year than in recent Fed history, but also called that healthy.
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