The Fed’s first meeting of the year will occur today and tomorrow, after which it will issue a policy statement. Among four regional Fed bank presidents who will rotate onto the policymaking group are two who have spoken out against the Treasury bond plan: Charles Plosser of the Federal Reserve Bank of Philadelphia and Richard Fisher of the Federal Reserve Bank of Dallas.
Plosser and Fisher would probably oppose any effort to extend the program. They may even pressure chairman Ben Bernanke to scale back the program before June.
The Fed’s mid-March or late-April meetings will probably be pivotal. That’s when the Fed will probably signal its decision about the bond-buying program. The bond purchases, besides inciting concerns from some Fed officials, have drawn criticism from Republican lawmakers and from China, Brazil, Germany, and other key trading partners.
When they were previously voting members, during the 2008 financial crisis, Fisher and Plosser opposed Bernanke’s deep interest rate cuts. Fisher dissented at five of the Fed’s 10 meetings that year, Plosser at two.
Both could also dissent from the Fed’s likely decisions this year to continue holding its key interest rate at a record low near zero. Most economists don’t think the Fed will start boosting rates until next year. But Fisher and Plosser may try to prod the Fed to raise rates sooner.
At this week’s meeting, the Fed is all but certain to maintain the pace of its bond-buying program, and hold interest rates at ultra-low levels. While Bernanke has said the economy is strengthening, he and other officials have also cited economic threats that they say justify continued bond purchases.
More foreclosed homes could depress home prices, for example. State and local governments around the country are facing budget crises and may further cut spending and staff levels. Europe’s debt problems could roil Wall Street, dragging down stock prices.
Combined, those possibilities could cause Americans to spend more cautiously, slowing the economy.
