As dissension in central banking goes, yesterday’s discord was fairly tepid but significant nonetheless.
The Fed’s whopping 75-basis-point cut on Tuesday, which lowered the Fed fund rate to 2.25%, was approved by eight and questioned by two. Richard Fisher and Charles Plosser raised doubts about the wisdom of FOMC majority’s analysis by voting against the rate cut. Quoting yesterday’s FOMC press release, we’re told that the two holdouts on easing “preferred less aggressive action at this meeting.”
Voting FOMC members who voice opposition to the Fed’s will, in fact, has become routine of late. Since the central bank starting cutting rates last year, there have been dissents each and every time. In the last five FOMC meetings, four of the dissents were in favor of either no cut or a lesser cut. (The fifth dissent was actually in favor of an even bigger cut).
That compares with the previous run of unison in FOMC voting. By the standards of recent history, the rise of dissension in the ranks suggests that it’s less than obvious that slashing interest rates is a no-brainer in the minds of those who steer the world’s most important central bank.
Fisher, president of the Dallas Fed when he’s not casting votes in the FOMC, has now voted nay twice this year. Reviewing his public comments in recent months leaves no doubt that he’s more worried about inflation rather than slow economic growth and Wall Street credit ills.
Speaking in London a few weeks back, Fisher laid out his bias in no uncertain terms when it comes to choosing the central bank’s priorities at this point in the cycle. “Containing inflation is the purpose of the ship I crew for,” he asserted via DallasNews.com. “And if a temporary economic slowdown is what we must endure while we achieve that purpose, then it is, in my opinion, a burden we must bear, however politically inconvenient.”