U.S. Federal Reserve officials may be in broad agreement that interest rates are...
- U.S. Federal Reserve officials may be in broad agreement that interest rates are unlikely to change soon, but they differed Monday on how concerned they are about developing financial risks in assessing when a rate hike might be appropriate.
“It is going to be a pretty high bar for us to make policy more contractionary,” Bostic said in remarks to the Rotary Club of Atlanta. “We are going to want to let the economy run and run hot enough to where inflation starts to move and gets us to a place where we are comfortable that level is not a threat to expectations.”
However Boston Federal Reserve bank President Eric Rosengren argued Monday that the central bank needs to stay on guard both to an inflation surprise and to the possibility that continued cheap borrowing costs could overinflate asset values, particularly in real estate, and set the stage for a collapse.
At a recent economics conference, former Fed Chair Janet Yellen called for the Fed to develop alternate tools to address financial stability concerns so that interest rate decisions could be based on the behavior of unemployment and inflation - the Fed’s two congressionally mandated responsibilities. In the current environment that would likely mean leaving rates low in order to encourage businesses and households to spend, and thus support continued job growth.
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