For The First Time Since 2007, Federal Reserve Official Dissents From Central Bank Policy From The Left

The Federal Reserve today released its latest policy statement, announcing that it is taking no new moves to boost the economy’s sluggish growth. However, for the first time since 2007, one of the voting members of the central bank — Chicago Fed President Charles Evans — dissented from the Fed’s decision from the left:

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.

Evans has been a consistent voice on the Fed for doing more to stimulate the economy. He laid out his reasoning in a speech last month:

With unemployment having lingered for so long at rates around 9 percent, it is perhaps natural that some would begin to think that nothing more can be done to improve upon this situation. However, I don’t agree…[T]hese are not ordinary times — we are in the aftermath of a financial crisis with massive output gaps, with stubborn debt overhangs and high degrees of household and business caution that are weighing on economic activity. As Ken Rogoff wrote in a recent piece in the Financial Times, “Any inflation above 2 percent may seem anathema to those who still remember the anti-inflation wars of the 1970s and 1980s, but a once-in-75-year crisis calls for outside-the-box measures.” The Fed has done a good deal of thinking out of the box over the past four years. I think it is time to do some more.

The last dissent from the left on the Fed was from Boston Fed President Eric Rosengren, who has also said that “if the economy gets weaker and the inflation rate gets lower, we should be thinking about alternative policies.”

As Matt Yglesias has written, “the Federal Reserve system has an obligation to not sit idly by and let the country endure years of mass unemployment.” However, several of the right-leaning members of the central bank have consistently said the Fed shouldn’t do more out of fears of sparking inflation.

But that bias on may be shifting. As the Wall Street Journal noted, “Vice Chairwoman Janet Yellen, New York Fed President William Dudley and Governor Daniel Tarullo all warned that the economy is at risk and that the Fed may need to purchase more securities-a step known to some as quantitative easing-to push down long-term rates.” Since congressional Republicans don’t seem inclined to let anything that might even moderately help the economy become law, hoping for the Fed’s doves to swing the central bank in their favor might be one of the few options left for boosting the economy.