Although a Bloomberg article, “Bernanke Plays `Dangerous Game’ Balancing Rate Talk With Action,” focused on the Fed’s rate dilemma, it also in passing revealed a sharp difference of opinion on the central bank’s likely actions later this year between economists and market participants:

While Bernanke’s warning that the Fed will “strongly resist” a jump in inflation expectations led traders to bet on a rate increase, economists are more skeptical. All 101 in a Bloomberg News survey said the Federal Open Market Committee will keep the benchmark rate unchanged tomorrow and most analysts this month predicted officials will stand pat until 2009. “That’s the dangerous game,” said Scott Anderson, senior economist in Minneapolis at Wells Fargo & Co., the fourth- largest U.S. bank by market value. “Instead of putting the shot across the bow on inflation,” Bernanke might have “held off a few more months to let the credit crisis heal a little bit more.”… There are widespread expectations among traders for a rate rise in the next three months: There are 36 percent odds of a boost in August and 93 percent in September, according to futures contracts on the Chicago Board of Trade.

The balance of the year will provide an interesting test case of whose needs take precedence as far as the central bank is concerned. Heretofore, it has seemed almost deathly afraid of disappointing Fed futures expectations. At the same time, it has also been hyper-responsive to any sign of distress in the financial services industry, leading one wit to observe, “75 is the new 25.”

Although it’s generally unwise to side with economists when forecasting is concerned. the reason for their near-unanimity of opinion is their expectation of continued weakness in the financial sector. Personally, I think it’s even worse than that, that new problems will surface (such as rising woes at regional and smaller banks, renewed difficulties at the large players as the impact of the monoline downgrades ripple through). And if the stresses are visible, or worse, disruptive, the views of the Fed funds traders can turn on a dime.

The wild card here is that the number of open seats on the FOMC gives the bank presidents more say, and they tend to be more vocal and hawkish. Absent tangible evidence of worsening conditions in the financial services industry, their views will probably prevail