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RISMEDIA, January 29, 2010—(MCT)—Amid the political rancor over Federal Reserve Chairman Ben S. Bernanke’s bid for a second term, central bank officials encountered some dissension in their first policy-setting meeting of the year, even as they affirmed their pledge to keep interest rates at near zero for “an extended period.”

For the first time in a year, the Fed’s monetary policy committee’s statement, issued at the conclusion of its two-day meeting, came with a dissenting vote. Thomas M. Hoenig, president of the Federal Reserve Bank in Kansas City, voted against the policy action, indicating that economic and financial conditions had improved enough that the statement to maintain the benchmark short-term rate for an extended period was unwarranted.

Some analysts interpret “extended period” as meaning at least six months, but nobody knows for sure. And Hoenig’s opposition, which had surfaced in a speech he gave last month, didn’t seem to change most economists forecasts that the Fed would probably begin to raise the fed funds rate late this year at the earliest.

Nonetheless, the dissenting voice could presage an earlier-than-expected increase in interest rates in a pre-emptive move to stave off long-term inflation or inflation expectations.

The fed funds rate, or the rate on overnight bank loans, is the basis for the prime rate, currently at 3.25%, which in turn is used in setting credit card rates and home equity and auto loans.

At this point, most in the Fed’s currently 10-member committee, including Bernanke, clearly remain more concerned about the durability of the economic recovery particularly given the sluggish labor market than the risks of inflation, which has been running at below the Fed’s target of 2%. In their recent statement, the Fed removed the language it had kept for some time that economic activity was likely to remain weak, instead replacing it with a note of cautious optimism that “economic recovery is likely to be moderate for a time.”

The Fed reiterated its commitment to wind down some emergency lending programs that were launched to prop up financial markets during the recession. The central bank also reaffirmed that it expected to complete its $1.25-trillion purchase of mortgage-backed securities by March 31. The program was aimed at driving down mortgage rates and boosting the housing market.

(c) 2010, Tribune Co.

Distributed by McClatchy-Tribune Information Services.