Apr 9, 2024 - Economy

Dissent at the Fed could be on its way back

Federal Reserve monetary policy dissents
Data: Federal Reserve Bank of St. Louis; Chart: Tory Lysik/Axios Visuals

This has been a period of uncommon unanimity among Fed policymakers, with no formal dissents at a monetary policy meeting in nearly two years. But that could soon change.

Why it matters: An increasingly vocal bloc of monetary hawks is expressing wariness of plans to cut interest rates in the near term. That may complicate plans to shift toward easier policy.

Driving the news: Last week, Fed governor Michelle Bowman raised the possibility that the central bank's next move might be to raise rates, not cut them, given stubborn inflation.

  • Atlanta Fed president Raphael Bostic — who has a vote on the policy committee this year — said he sees only one rate cut near the end of 2024 as justified, not the three embraced by most of the policy committee.
  • Minneapolis Fed president Neel Kashkari mused, "If we continue to see inflation moving sideways, then that would make me question whether we needed to do those rate cuts at all." He next has a vote in 2026.

Between the lines: None of the officials has explicitly stated they would dissent from rate cut plans, but their views put them well on the hawkish side of their colleagues.

  • Others who appear to be in the hawkish camp include governor Chris Waller, the Kansas City Fed's Jeff Schmid, the Cleveland Fed's Loretta Mester and the Dallas Fed's Lorie Logan.
  • If Bowman or Waller dissents, it would be the first time a governor — as opposed to reserve bank president — has done so since 2005.

State of play: There has not been a policy dissent in the last 14 meetings, dating to June 2022.

  • It reflects chair Jerome Powell's consensus-building skills, and wide agreement on the committee about the urgency of bringing down inflation.
  • The only other stretches that long with no dissents in recent decades were 2004-2005 and 1999-early 2001, during Alan Greenspan's chairmanship.
  • That is from our analysis of the St. Louis Fed's great compilation of dissent data found here.

The big picture: At their best, formal policy dissents can signal a vibrant debate and diverse perspectives. At their worst, they can undermine the effectiveness of the central bank's leadership.

  • The eight dissents that chair Ben Bernanke faced in 2008, all favoring tighter policy, were distinctly unhelpful in a year when the global financial system was unraveling.

What they're saying: "We're a very consensus-oriented organization, and we do try to achieve consensus and, ideally, unanimity," Powell said at last month's news conference.

  • "We've always had dissents," he said. "But ... you respect thoughtful dissents very much. It's like, you may not agree with some arguments, but you really want to understand them."
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