The Wall Street Journal reports:

The Federal Reserve’s internal debate over interest rates has turned a corner. Officials are no longer arguing about when to resume cutting. Instead, they are starting to talk about the conditions that would warrant a hike.

The shift came further into view on Friday, when three Fed bank presidents released statements explaining why they had objected on Wednesday to language characterizing the central bank’s next likely move as a cut.

Depending on how the economy evolves, “it could plausibly be appropriate for the…next rate change to be either an increase or a cut,” Dallas Fed President Lorie Logan, one of the dissenters, said on Friday.

Together with Wednesday’s comments from outgoing Chair Jerome Powell, the dissents reveal a committee partway through a three-stage shift in how it signals the path of rates—from hinting at cuts, to neutral, to flagging potential hikes.

This week’s meeting showed the committee moving from the first to the second stage. Powell’s comments suggest a shrinking majority embraced the first step with less conviction than they had before while a growing minority pushed for the second. In his own statement on Friday, Minneapolis Fed President Neel Kashkari began sketching out conditions for the third. [Continue reading…]