By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) — Federal Reserve officials who will be voting members of the interest-rate setting Federal Open Market Committee have softened their tone in the public debate over the central bank’s controversial $600 billion bond buying plan.
The most recent example came Tuesday in a speech by Charles Plosser, the president of the Federal Reserve Bank of Philadelphia.
Last year, Plosser voiced strong opposition to the Fed’s bond-buying plan. But in his first speech at a voting member, he was more even-handed.
To be sure, Plosser voiced concerns about having to stop or curtail purchases if the economy gathers steam.
But the inflation hawk left open the door for more easing if more serious deflation risks emerge.
“If serious risks of deflation or deflationary expectations emerge, then we would need to take that into account as we adjust our policy stance,” Plosser said.
Fed watchers are watching closely to see how many FOMC members dissent at the first Fed meeting in Jan. 25-26.
This year, the new FOMC members were considered more “hawkish” given their grave concerns about any rise in inflation.
Plosser is considered by many to be the most likely to be a frequent dissenter, taking the mantle from Kansas City Fed President Thomas Hoenig.
Hoenig, who rotated off the FOMC at the end of 2010, dissented from all eight policy statements in 2010.
Under Fed rules, four of 11 regional Fed bank presidents rotate as voters. The president of the New York Fed always votes along with the Fed board of governors in Washington.
The Philadelphia Fed president made no secret that he doesn’t expect deflation to emerge and he believes tighter policy many be needed soon.
“The aggressiveness of our accommodative policy may soon backfire on us if we don’t begin to gradually reverse course,” he said.
Robert Brusca, chief economist at FAO Economics, said Plosser is going to “go out of his way to seem open-minded because he doesn’t want to have a dissent chip on his shoulder.”
Earlier this week, two other new FOMC voters also took moderate positions on the bond-buying plan.
Narayana Kocherlakota, the president of the Minneapolis Fed Bank who has been critical of the bond-buying plan, told The Wall Street Journal that the “bar for dissent from the committee is going to be pretty high for me.”
