Different Opinions on Near Term Monetary Policy Prevail Within the FOMC

By: Asha_Bangalore

Fed officials have voiced different opinions about the direction of monetary policy in the past two days. Among FOMC members who are wary of the current stance of Fed policy, President Kocherlakota of the Minneapolis Fed indicated the Fed needs to commence reversing the extraordinary accommodation in the next six to nine months.

At the other end of the spectrum, Fed Vice Chair, Janet Yellen’s views are:

"I consider a highly accommodative policy stance to be appropriate in present circumstances. But considerable uncertainty surrounds the outlook, and I remain prepared to adjust my policy views in response to incoming information,"

"In particular, further easing actions could be warranted if the recovery proceeds at a slower-than-expected pace, while a significant acceleration in the pace of recovery could call for an earlier beginning to the process of policy firming than the FOMC currently anticipates."

President Dudley of the New York Fed described the decision pertaining to easing of monetary policy as follows:

"QE3 is all about cost and benefits," Dudley said in response to a question at the Center for Economic Development in Syracuse. "If the economic outlook were to worsen... then the benefits of doing more (QE) would increase."

Atlanta Fed President Dennis Lockhart’s opinion runs along these lines:

"I'm somewhat reticent to consider another round of quantitative easing at this time," Lockhart told a press briefing on the sidelines of a conference sponsored by his bank at Stone Mountain, Georgia.

"I view it as a policy that would respond more to a fairly dramatic negative change of direction in the economy," said Lockhart, a 2012 voting member of the policy-setting Federal Open Market Committee.

Of these members of the FOMC, the Dudley, Yellen, and Lockhart are voting members and Kocherlakota is a non-voting member. The bottom line for April 24-25 FOMC meeting is that the Fed is most likely to tweak the policy statement of March slightly and maintain the current monetary policy stance.

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2012 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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