FED FOCUS-2013 rings in more dovish Fed and maybe some dissent

Dec 11 2012, 17:59 IST
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The Federal Reserve Ben Bernanke (AP) The Federal Reserve Ben Bernanke (AP)
SummaryThe annual shuffle of voters also raises the possibility of more dissents.

The Federal Reserve may tip toward doing even more to boost the US economy in 2013 as two outspoken advocates for a super-easy monetary stance rotate into voting spots on its policy panel.

The annual shuffle of voters also raises the possibility of more dissents, analysts said, but not enough to offset the small but noticeable dovish shift.

Incoming voters Charles Evans, who leads the Chicago Federal Reserve Bank, and Eric Rosengren of the Boston Fed have argued that the central bankBSE -2.23 % needs to go beyond its already aggressive easing of monetary policy to bring down unemployment.

They are also at the forefront of efforts to adopt numerical thresholds for unemployment and inflation that would underscore the Fed's willingness to keep policy easy for a long, long time.

The new lineup, which will be in place for the Fed's first meeting of 2013 in late January, "tilts slightly more in favor of further accommodation," said Michael Gapen, an economist at Barclays, in New York.

The Fed has kept interest rates near zero since December 2008 and expects to keep them there until at least mid-2015. It has also bought $2.3 trillion in long-term securities and is expected to announce more purchases on Wednesday after a two-day meeting.

Next year, it will wrestle with the question of just how far it should go.

GEORGE TO TAKE UP BATON OF DISSENT?

Each January, four regional Fed bank presidents rotate into voting spots on the policy committee and four rotate out.

This year, Richmond Fed President Jeffrey Lacker made his discomfort with the central bank's easy stance known with dissents at every meeting.

He will be rotating off the voting roster, as will Cleveland Fed President Sandra Pianalto, AtlantaBSE -1.08 % Fed President Dennis Lockhart and San Francisco Fed President John Williams.

Kansas City Fed President Esther George, who next year will cast her first votes since succeeding Thomas Hoenig in the job in 2011, could take up the baton of hawkish dissent.

While she has been less openly critical of current policy than Hoenig, who used all of his final votes to dissent against Fed easing, George has sounded a couple of skeptical notes.

"Only time will tell if George will assume the role of 2013 voting hawk," said Neal Soss, Credit Suisse economist in New York.

St. Louis Fed chief James Bullard, who has said he would have voted against the central bank's decision in September to embark on a new round of

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