Federal Reserve Chair Janet Yellen, praised as an adept listener and consensus builder, may need to adopt a stronger tone at this week’s policy meeting if she expects to keep a December interest rate rise in play.
Yellen’s inclusive style has been tested recently by two fellow governors who publicly appeared to disagree with her view, shared by Vice Chair Stanley Fischer, that the Fed will probably need to raise interest rates this year.
Governors are permanent members of the Fed’s policy-making panel who typically vote with the chair, and it is unusual for them to publicly contradict the Fed chief. Yet both Lael Brainard and Daniel Tarullo, speaking shortly after Yellen and Fischer, listed an array of risks to economic growth that suggested rate hikes should wait.
Most other Fed voters, with the notable exception of the dovish president of the Chicago Fed, have suggested that they, like Yellen, support a 2015 rate rise. The arithmetic suggests Yellen could face as many as three dissents from her 10-member panel if she decides to raise rates at the Fed’s December meeting.
It may not come to that since regardless of the debate about the timing of the rate lift-off nearly all Fed policymakers do agree on a broad scenario of gradual rate increases once they start. Fed tradition may also count: though regional presidents sometimes dissent, no governor has done so since 2005.
What is perhaps more troubling for Yellen than the specter of dissents is that many investors do not believe the Fed will raise rates at all this year. Unless Yellen manages to shift those expectations well ahead of time, possibly starting with the Oct. 27-28 meeting, a rate hike could roil markets.