Differences are a strength of Fed strategy: Kohn

Speaking in New Orleans on Saturday, Kohn said: "Because the situation has been so fluid and so uncertain in its effects, the speeches of individual FOMC participants have given varied interpretations of the developments and their implications for policy. The resulting dispersion of messages has bothered market participants seeking clear, unambiguous guidance about the views of the central bank. The public should understand that the FOMC members do not coordinate schedules and messages, and that members' views are likely to be especially diverse when, as in the current situation, circumstances are changing quickly and are subject to many different analyses."

He added: "The diversity of views on the Committee is one of its strengths and vital to arriving at sound decisions. As I noted in the introduction to this talk, sound decisions are the most important contributions we can make to further the accomplishment of our public policy objectives."

Speeches made in the run-up to the December rate-decision suggested a divide in the views of committee members on whether the upside risks to inflation outweighed the downside risks to growth after the statement of the FOMC published after the decision on Halloween to cut rates by 25 basis points said the risks were roughly balanced.

Randall Kroszner , a governor at the central bank, Thomas Hoenig, the president of the Kansas City Fed, and Charles Plosser, the chairman of the Philadelphia Fed and a non-voting member of the FOMC, indicated that rates were already low enough in November.

However, Kohn's comments on 28 November that the "increased turbulence of recent weeks [has] partly reversed some of the improved market functioning over the late part of September and in October", and Bernanke's comments the following day that the outlook had been "importantly affected over the past month by renewed turbulence in financial markets, which has partially reversed the improvement that occurred in September and October," were seen as an indication that there was support for the view that economic conditions had worsened.

All but one of the FOMC's voting members ended up backing the December decision to cut rates by 25 basis points. The dissenting vote, belonging to Eric Rosengren, the president of the Boston Fed, was for a lowering of half a percentage point, indicating that all of the committee's members appreciated that the risks to growth outweighed those to inflation.

To read the speech, click here