Opposition is brewing within America’s central bank.
The Fed didn’t raise key interest rates on Wednesday. But the vote wasn’t unanimous. Three Fed presidents voted the opposite way — a rare amount of opposition, and the most in nearly two years.
Typically, almost all its officials vote in line with Fed Chair Janet Yellen. Now, dissent is rising.
“This seems to have been one of the most divisive [Fed] meetings in recent memory,” says Paul Ashworth, chief U.S. economist at Capital Economics, a research firm. The last time there were three dissenters was in December 2014.
The U.S. central bank has come under a lot of criticism lately by Wall Street for the fact that many of its officials give speeches that send wildly conflicting messages. Some leaders argue for raising rates, and others make the case against a rate hike. It confuses investors.
The U.S. Federal Reserve is charged with the task of setting the country’s monetary policy. Decisions are made by members of the Federal Open Market Committee, which meets eight times a year. It has 12 voting members, including Yellen.
Through the post-recession recovery the Fed has hemmed and hawed about raising rates from levels that reflect a country in economic crisis. It raised rates last year for the first time in nearly a decade.
At the beginning of this year, its leaders projected raising rates four times — but that hasn’t happened either. After a slew of headwinds earlier in the year, the Fed now appears like it will only raise rates once — if that.
Such shifting amplifies the concerns that the Fed is losing credibility, and its members are pushing back.
Yellen downplayed the divide during her press conference on Wednesday, saying Fed leaders aren’t as split as “you might think.”
Yellen also pushed back against criticism that the Fed is losing any credibility, arguing that it’s good all Fed officials don’t have the same opinion and there’s a range of voices.
“It’s a very good thing that the [Fed] is not a body that suffers from group think,” Yellen said, referring to the concept of everyone in a group believing the same thing.
Still, Yellen appeared to tip toe on the case for and against a rate hike. In August, she said the case for a rate hike had “strengthened.” She reiterated that belief Wednesday, and said the decision not to raise rates didn’t reflect a lack of confidence in the economy, but because she believed the economy had a “little more room to run.”
Kate Warne, investment strategist at Edward Jones was surprised at the number of dissents. “The forecasts and the statement suggest a rate hike is increasingly likely in December,” she said.
The Fed has two more meetings this year in November and December. Most investors are betting the Fed will wait till December to raise rates once again.