The vice-chairman of the US Federal Reserve has admitted that the central bank’s message has become confused because of the wide range of opinions expressed by members of its interest-rate-setting committee.

Donald Kohn told the American Economic Association that “the resulting dispersion of messages has bothered market participants seeking clear, unambiguous guidance about the views of the central bank”.

His comments came only three weeks before the Federal Open Markets Committee (FOMC)’s next interest-rate-setting meeting, on January 30, when the Fed is widely expected to cut the cost of borrowing for the fourth time since September.

Data published at the end of last week showing that America’s jobs market had effectively ground to a halt have raised expectations that the Fed is more likely to cut interest rates by half a percentage point to 3.75 per cent in order to avert a recession.

Critics have grumbled that sometimes the Fed has sounded optimistic about the economy and downbeat about its prospects at the same time, cutting interest rates while giving warning about the risk of surging inflation. Wall Street is nervous of such ambiguity because the financial community wants to be reassured how far the central bank will go to protect America from a recession by cutting interest rates.

Mr Kohn defended the bank’s policy-making process: “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. The diversity of views on the committee is one of its strengths and vital to arriving at sound decisions.”

On Friday, the US Labour Department published data showing that American employers had provided the fewest new jobs in December for four years, driving the unemployment rate up to 5 per cent, a two-year high.

Wall Street will also be keen to hear comments from Henry Paulson, the US Treasury Secretary, today, when he delivers a speech in New York about the state of the US equity market.

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