Four new voting members of the Federal Open Market Committee, the monetary policy body that sets interest rates, may bring a more hawkish tone when they assume their roles in 2011.
Of the four new members — heads of regional Fed offices — only one appears to side with Fed Chairman Ben Bernanke's expansionary measures to refuel economic growth, The New York Times reports.
Since Bernanke spearheaded a second round of so-called quantitative easing — a plan in which the Fed buys government securities from banks in order to hold down mortgage and other long-term interest rates — criticism has arisen from foreign central bank officials who complain of resulting hot money flying into their economies, as well as from conservative Republicans, who fear it will disrupt U.S. recovery and cause inflation.
The committee will be "a little more hawkish, on net, although I don’t think it’s a sea change," Jan Hatzius, chief United States economist at Goldman Sachs, tells The New York Times.
Yet one new voting member in particular, Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia, has really voiced concern with the Fed's role in recovery.
"I’d like the recovery to be faster, but I’m not sure monetary policy can do much about that," Plosser has said.
Some say the Fed wants higher consumer prices so the country will feel recovery is under way and avoid an equally devastating scenario: deflation.
"I kind of get the impression that we're buying insurance against deflation," John Silvia, chief economist for Wells Fargo Securities in Charlotte, N.C., tells McClatchy Newspapers.
"When you look at the process, the challenge you see is that a lot of financial institutions, and some consumers, have cash and are not putting it to work."
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