From the WSJ:
Ben Bernanke on Tuesday faced the stiffest internal opposition a Federal Reserve chairman has confronted in nearly 20 years, highlighting his determination to do whatever he sees as essential to supporting a weak economy.
For the first time since 1992, when Alan Greenspan was chairman, three out of 10 voting officials dissented from the central bank’s decision to tell the public it plans to keep short-term interest rates close to zero at least until mid-2013.
The move is aimed at boosting the economy by pushing back the expectation of when rates will rise from current record lows, thus keeping borrowing costs down and potentially driving investors into stocks. Previously, the central bank said rates would remain at record lows for an “extended period,” meaning at least several months, not years.
But Richard Fisher of the Dallas Fed, Narayana Kocherlakota of Minneapolis and Charles Plosser of Philadelphia were against the move. They have expressed concerns that the Fed’s easy-money policies risk driving inflation too high and might create a bubble like the housing boom at the root of the recent financial crisis.
Mr. Bernanke’s Fed is more open and less personality-driven than that of his predecessors, Mr. Greenspan and Paul Volcker, making dissents more likely. But the central bank has traditionally strived to avoid more than two dissents for fear they would be seen as a vote of no confidence in the chairman. Mr. Bernanke’s resolve to push ahead suggests he won’t hesitate to take bolder steps if he deems them necessary to help the economy.
“I’m absolutely confident Bernanke won’t be deterred by the three dissenters,” said Larry Meyer, a Fed governor from 1996 to 2002, now at forecasting company Macroeconomic Advisers.
Mr. Bernanke’s willingness to override three dissents could be evidence of a shift toward a majority-rule, decision-making process at the Fed, in which a minority of officials worried about higher inflation, such as Mr. Fisher, Mr. Kocherlakota and Mr. Plosser, are marginalized.