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Dissents highlight divisions at the Fed

WASHINGTON — Two Federal Reserve officials who dissented from this week’s quarter-point rate cut on Friday highlighted the current deep divisions at the central bank.

Eric Rosengren, head of the Fed’s Boston regional bank and one of two officials who opposed the rate cut, said Friday that the additional stimulus was not needed. He said it ran the risk of inflating the price of risky assets and encouraging households and business to take on too much debt.

James Bullard, head of the St. Louis Fed branch, dissented in favor of a bigger half-point cut. He argued that a larger reduction would have provided needed insurance against a sharper slowdown.

Both officials issued explanations of their dissents after the blackout period for public comment surrounding Fed meetings ended.

In a CNBC interview Friday, Vice Chairman Richard Clarida, who supported the latest quarter-point rate cut, said healthy debate is a strength of the Fed system.

The Fed approved a second quarter-point rate cut on Wednesday by a vote of 7-3, the first time there have been as many as three dissents since September 2016 and the first time that there had been dissents going in opposite directions in nearly five years.

Clarida insisted that the split was not a sign that the Fed was having troubles arriving at the proper interest rate setting for the economy.

“The Fed has a long tradition of candid, frank discussion about the economy. I think it is a strength of our system,” he said Friday.

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