Dissent may mark FOMC's next meeting on rates: analysts debate over near-zero interest rates is showing signs of heating up

By Greg Robb, MarketWatch March 3, 2010

Recently Federal Reserve officials have begun to disagree on the decision to keep interest rates low for an ‘extended period of time’. In the upcoming Fed meeting scheduled for March 16 there is likely to be some disagreement. Thomas Hoenig president of the federal bank of Kansas City has stated that he disagrees with holding policy steady and will most likely oppose the policy at the upcoming meeting. Hoenig believes that the Fed should prepare to raise interest rates, despite the fact that the nation’s unemployment rate remains high. Eric Rosengren the president of the Federal Reserve Bank in Boston believes that the current low interest rates are appropriate due to the slow recovery. Both members have openly expressed their opposing views to the public, clearly showing that there is uncertainty ahead.

“‘Despite the Fed's aggressive use of both traditional and non-traditional policy tools, the economy is experiencing a slow recovery from a very severe recession,’ said Rosengren, a leading dove on the FOMC, in a speech to a conference sponsored by the Global Interdependence Center in Philadelphia.”

Since both Rosengren and Hoenig are both voting members on the FOMC this year, there is likely to be some debate over the issue of interest rates. The debate over interest rates is fueled by the issue of an asset bubble that could be the result of keeping interest rates low for an extended time period. Hoenig believes that keeping interest rates low will create future problems. The effect this has on monetary policy will be seen in the upcoming weeks.