Few expect any major shifts when the Federal Reserve's policymaking panel meets this week, even though two of its new voting members have been skeptics of the Fed's $600 billion Treasury bond purchase plan.
That could all change by spring, when the Fed must decide whether to extend its bond purchases. Any push to renew the program beyond its scheduled June 30 end date would likely face stiffer resistance within the Fed.
The Treasury bond purchases are intended to aid the U.S. economy by lowering interest rates, encouraging spending and raising stock prices. But some, like the two new Fed voting members, warn that the bond purchases could eventually ignite inflation by keeping rates too low for too long.
The Fed's first meeting of the year will occur Tuesday and Wednesday, after which it will issue a policy statement. Among four regional Fed bank presidents who will rotate onto the policymaking group are two who have spoken out against the Treasury bond plan: Charles Plosser of the Federal Reserve Bank of Philadelphia and Richard Fisher of the Federal Reserve Bank of Dallas.
Plosser and Fisher would likely oppose any effort to extend the program. They may even pressure Chairman Ben Bernanke to scale back the program before June.
The Fed's mid-March or late-April meetings will likely be pivotal. That's when the Fed will probably signal its decision about the bond-buying program. The bond purchases, besides inciting concerns from some Fed officials, have drawn criticism from Republican lawmakers and from China, Brazil, Germany and other key trading partners.
When they were previously voting members, during the 2008 financial crisis, Fisher and Plosser opposed Bernanke's deep interest rate cuts. Fisher dissented at five of the Fed's 10 meetings that year, Plosser at two.
Both could also dissent from the Fed's likely decisions this year to continue holding its key interest rate at a record low near zero. Most economists don't think the Fed will start boosting rates until next year. But Fisher and Plosser may try to prod the Fed to raise rates sooner.
At this week's meeting, the Fed is all but certain to maintain the pace of its bond-buying program, and hold interest rates at ultra-low levels. While Bernanke has said the economy is strengthening, he and other officials have also cited economic threats that they say justify continued bond purchases.
More foreclosed homes could depress home prices, for example. State and local governments around the country are facing budget crises and may further cut spending and staff levels. Europe's debt problems could roil Wall Street, dragging down stock prices.
Combined, those possibilities could cause Americans to spend more cautiously, slowing the economy.
"The Fed is going to proceed cautiously," said Alice Rivlin, who served as the Fed's No. 2 official in the late 1990s. "They are looking for a stronger recovery, but they can't predict exactly how it will play out."
Fisher and Plosser probably won't dissent at this week's meeting. But they're likely to break from Bernanke in the spring. The economy is expected to be growing faster by then, and inflation could be running a bit higher. Still, unemployment, now at 9.4 percent, is expected to remain elevated.
Fisher and Plosser are considered inflation "hawks" — more concerned about the threat of high inflation than about the need to stimulate the economy. They're less inclined to back low interest rates and other steps that might ease high unemployment if the risk of fanning inflation seems too high.
Bernanke pushed for the bond-buying program, announced Nov. 3, because the economy had been growing too slowly to reduce unemployment. He said he also worried that the sluggish economy could lead to deflation — a dangerous drop in prices, wages and values of homes and stocks.
The question is what happens to the Fed's bond-buying program as spring approaches.
"I think by the March or April meeting the Fed will want to give a hint about what to do with the program," said Randy Kroszner, a former Fed governor who served with Bernanke.
Even with the addition of Plosser and Fisher, Bernanke commands enough support on the 11-member Federal Open Market Committee to advance his economic policies. (The two other new voting members this year — Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, and Charles Evans, president of the Federal Reserve Bank of Chicago — have backed the bond-buying plan.)
But Plosser and Fisher could complicate the message Bernanke's Fed sends to the public and Wall Street investors. That's because even if Bernanke has enough votes to endorse his approach, he would want to avoid the appearance of too much dissension within the Fed.
As a result, the chairman might have to compromise on the wording of the statements the Fed issues after its meetings to bring Fisher and Plosser on board, said Vincent Reinhart, who formerly served as an economist for the Fed committee.
Having Fed too many officials speak out publicly against Fed policies, as Fisher, Plosser and others have done, could hurt Bernanke's ability to convey a clear and unified policy stance.
"What's really affected here is the Fed's communications," Reinhart said. "It will complicate Bernanke's job of getting his message out clearly."