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Poole's Last Gasp May Awaken FOMC Dissent

Dissent by an outgoing member of the Federal Open Market Committee could set a precedent for other FOMC members to dissent next year.

Dissent by an outgoing member of the Federal Open Market Committee could set a precedent for other FOMC members to dissent next year.

William Poole, president of the Federal Reserve Bank of St. Louis, is expected to take a final stand at this week's end-of-year meeting that could influence economic policy long after he's left the voting committee. While FOMC members have so far been limited to dissenting on interest rate changes and the risk assessment message within the FOMC statement issued after the meeting, Poole may choose to dissent over the policy sentence of the FOMC statement, according to John Herrmann, director of economic commentary at Cantor Viewpoint. He said this because Poole has often made public statements calling for the FOMC to act in a way that is more dependent on the economic data before the meeting, so he may be likely to strongly push this idea in his last FOMC meeting, Herrmann speculated.

Fed Chairman Alan Greenspan has been careful to cultivate consensus among the FOMC members to telegraph a unified message on the direction of interest rates to calm a bond market jittery over oil shocks, terrorism and the presidential election. Surprises in the FOMC statement can cause large changes in Treasury yields, such as when a change in the January statement caused the five-year to jump 25 basis points in the half hour after the announcement.

Fed Governor Ben Bernanke might be the next to dissent because he would like to be the next Fed chairman and would want that extra exposure, Herrmann said. Fed governor Roger Ferguson may also be next because he is more concerned about the direction the economy is going with businesses stockpiling cash and low job growth.

Calls to Bernanke and Ferguson were not returned by press time. Poole declined comment.

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