NEW YORK (TheStreet) -- Minutes from the latest meeting of Federal Reserve's Federal Open Markets Committee revealed a deep rift among members over the decision to keep the benchmark interest rate at near-zero levels at least through mid-2013.
Three members -- Richard Fisher, Narayana Kocherlakota and Charles Plosser -- dissented on the decision at their Aug. 9 meeting.
Most members had agreed that the announcement provided useful guidance to the public, with some noting that it didn't remove the committee's flexibility to adjust the policy rate depending on economic conditions.
But the dissenters said they would have preferred to provide an "extended period" rather than an "at least through mid-2013" guideline on keeping the benchmark rate at near-zero.
During the meeting, Fisher said he felt that the fragility of the U.S. economy was chiefly attributable to nonmonetary factors, such as uncertainty about fiscal and regulatory initiatives.
He was concerned that the monetary policy committee didn't have enough information to be specific on the timeline for keeping the benchmark interest rate at 0% to ¼% and that, were it to do so, the committee risked appearing overly responsive to the recent financial market volatility.
Meanwhile, Kocherlakota's stance on the policy decision was shaped by his view that last November, the committee had chosen a level of accommodation that was well suited for the condition of the economy at that time.
But since November, inflation had risen and unemployment had fallen and he didn't believe that providing more monetary accommodation was the appropriate response.
Plosser, in the meantime, was concerned that the reference to 2013 might be misinterpreted as suggesting that monetary policy was no longer based on how the economic outlook evolved.
Although financial markets had been volatile and incoming information on growth and employment had been weaker than anticipated, he believed the statement conveyed an excessively negative assessment of the economy and that it was premature to signal, or be perceived to signal, further policy accommodation.
He also felt that the policy decision would do little to improve near-term growth prospects, given the ongoing adjustments and challenges faced by the U.S. economy.
-- Written by Andrea Tse in New York.
>To contact the writer of this article, click here:
Copyright 2011 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.