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Uneven Split in Fed Votes

3 Nov

The US Federal Reserve have voted… and the split in votes were far from even, although the general outcome of keeping interest rates on hold , and maintaining its bond-buying programmes were expected. This move will encourage more borrowing and investment. Chairman Ben Bernanke said the Fed was also considering changes to its communication strategy.

The committee voted 9-1 in favour of the statement, with the one dissenter being Charles Evans, an improvement from the 7-3 vote recorded in September. Mr Evans wanted the fed to take further action to boost the economy, although others fear that his methods would run the risk of higher inflation.

Eric Stein told the Financial Times Mr Evans position as sole dissenter, “could be a signal that his policy views were gaining ground”.

So what would Mr Evans do? He thinks the fed should keep interest rates low until unemployment falls below 3 percent, as long as inflation remains below 3 percent.

Mr Bernanke said unemployment was too high, and the economy was “dissatisfying”. Economists polled by Bloomberg predicted Friday’s figures would show the US Economy added 95,000 jobs in October. Also, a report from a placement company showed that job cuts have been the lowest levels since June, but lay-off announcements are still 12.6per cent higher than a year ago.

However, it’s not Mr Evans vote that has been causing discussion amongst analysts. They’re more concerned by the politics of the votes, regarding the three hawks who voted in favour.

Paul Ashworth said, “the view of the hawks is that, once the decision has been made by the majority, it just causes confusion if they continue to roll back action that has already been taken”.