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Split Among Fed Speakers Leaves September Rate Outlook Murky

  • Fed speakers give no sign of unity ahead of next decision
  • Officials are offering different interpretations of same data

The more that Federal Reserve officials speak, the more confused investors and economists become.

Fed Governor Daniel Tarullo repeated his cautious assessment of the economy during an interview Friday on CNBC television, while Boston Fed President Eric Rosengren argued there was a reasonable case for gradual tightening. Their remarks, ahead of the Sept. 20-21 meeting of the policy-setting Federal Open Market Committee, illustrate divisions on the FOMC that don’t help clarify what officials will decide.

“Basically, everyone is staying in their lanes,” said Stephen Stanley, chief economist at Amherst Pierpont Securities in New York. That makes it harder to gauge the implications of recent mixed data, including a below-forecast August U.S. jobs report. “The Fed has been so arbitrary in shifting rationales, it’s not systematic enough that people in my business can look at the data and be confident about what the Fed’s going to do.”

Fed hawks and doves -- those who favor an interest-rate increase and those who argue against it, respectively -- are retrenching their positions and using recent data to bolster their arguments. Hawks say consumer spending is strong, the job market has made impressive gains and keeping rates too low for too long comes at a financial stability cost. Doves say employment could progress further, inflation has only ticked up and a handful of weaker-than-expected data points bolster the case for patience.

Investors and analysts still see relatively low chance that the Fed will raise interest rates this month.

On Friday, Tarullo signaled he’s willing to be patient before deciding the economy has enough momentum to raise interest...