December 17, 2014 / 11:27 PM / 3 years ago

Despite dissents and high stakes, Yellen delivers clear Fed message

* Yellen to markets: rates to stay near zero until at least April

* Trader expectations for rate hike start stay in place

By Ann Saphir and Jonathan Spicer

SAN FRANCISCO/NEW YORK, Dec 17 (Reuters) - Federal Reserve Chair Janet Yellen pulled off a tricky policy transition on Wednesday, clearly telegraphing that interest-rate hikes are approaching even while three of her colleagues at the U.S. central bank objected to her new message.

The Fed has been slammed for sloppy communications in the past, especially after then-Chairman Ben Bernanke accidentally set off a global market rout last year.

Now that the Fed is looking to raise rates next year, the stakes were high as it sought to craft language that sets the stage for the first cycle of policy tightening in a decade, without unhinging market expectations that the hikes are still months away and will be gradual once they start.

Yellen finessed it, economists said, vowing to respond to economic developments even as she made assurances the Fed would stay patient. When U.S. markets closed, traders were expecting the Fed to begin rate hikes in September, the same timing they expected before the meeting.

“This is the market saying: ‘Ah, I get it,'” said Scott Clemons, a managing director at Brown Brothers Harriman. “The Fed does not want to be in the business of disruption; this is a steady monetary policy and the Fed will continue to be supportive of asset prices.”

Yellen delivered the “steady-as-she-goes” tidings even as three Fed officials used their final votes ever on the policy-making committee to register their dissent. All of them expressed discomfort with the Fed’s message, although two wanted the Fed to move faster on rate hikes and the third preferred a less aggressive stance.

It was the largest number of dissents Yellen has faced since taking the Fed’s helm earlier this year.

Economists said the Fed’s policy statement, issued before Yellen talked to reporters, came across as dovish given the now-familiar vow to keep rates low for a “considerable time,” albeit in a diminished manner, and because it nodded to low inflation.

Yellen later sounded more hawkish when she said inflation is expected to be near current levels when rates are raised, suggesting that could be as soon as April. Those words tempered a run-up in bond and stock markets.

“The statement and (forecasts) taken together were more dovish than what we got in October, but the tone was balanced out in some sense by Yellen’s press conference, and that was reflected in the markets,” said Credit Suisse economist Dana Saporta. (Additional reporting by Herbert Lash in New York)

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