Challenged on Left and Right, the Fed Faces a Decision on Rates

“There shouldn’t be this intense interest in a quarter-point increase, and there shouldn’t be this intense interest in whether it comes in September or December,” said Alan S. Blinder, a Princeton economist and the Fed’s vice chairman in the mid-1990s. “But the Fed remains the center of the financial universe. People stare at it like they stare at the North Star.”

Investors, who always pay attention to the Fed, are paying particular attention now. The central bank has held short-term rates near zero since December 2008; the impending end of that era is one cause of recent financial market turmoil.

And so, as Fed officials conferred with other central bankers and academics, the liberal activists held two days of “” teach-ins in a room directly below the main conference, while the conservatives convened a “” at a nearby dude ranch.

JACKSON HOLE, Wyo. — Conservative activists who want the to raise interest rates distributed chocolate coins in golden wrappers at the local airport last week as Fed officials arrived for their annual policy retreat.

With the critics lining up outside, central bankers found no escape inside the main conference, where a series of academics warned policy makers that their view of inflation was oversimplified, and that their policies were less effective as a consequence.

Liberal activists in green “Whose Recovery?” T-shirts formed a receiving line at the resort hotel in the heart of Grand Teton National Park where the meeting was held, to personalize their argument that the Fed should wait.

Sometime soon — and probably no later than the end of the year — the Fed plans to raise its benchmark interest rate one-quarter of one percentage point, a mathematically minor move that has become a very big deal.