The question of how quickly the Federal Reserve should raise rates is dividing normally like-minded policymakers at the U.S. central bank, pitting those who favor two hikes this year against a growing number of those who want to stop at just one.
That shift, and the very real possibility that Fed Chair Janet Yellen may be one of the five who now prefer a single rate hike in 2015 rather than among an equal number who prefer two, is bolstering the view that the Fed may not deliver until late in the year.
The Fed has kept interest rates near zero since December 2008, and on Wednesday unanimously voted to keep them there. Behind that unanimity rages a debate over how long that state of affairs should last.
“While we cannot be certain, our best guess is that Fed Chair Yellen now anticipates only one increase this year – an important shift in the committee’s center of gravity,” Goldman Sachs economists Jan Hatzius and Zach Pandl wrote in a note advising clients they now expect the Fed to wait until December to raise rates, from September previously.
“If Yellen is in the one-hike camp, she is the decider, and the other governors will likely vote in deference to the chair,” said Kevin Logan, chief U.S. economist at HSBC Securities, which also expects the Fed to hike rates only once this year, in December.