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Increasingly hawkish Fed ponders raising rates
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| Contributor | particleman |
| Last Edited | particleman Jun 03, 2010 11:28pm |
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| Category | General |
| Author | Pedro Nicolaci da Costa |
| Media | News Service - Reuters |
| News Date | Friday, June 4, 2010 05:00:00 AM UTC0:0 |
| Description | Three top Federal Reserve officials said on Thursday it may soon be time to begin raising interest rates as the economic recovery in the United States gathers momentum, despite persistently high unemployment.
Thomas Hoenig, president of the Kansas City Fed, argued the U.S. central bank should raise benchmark borrowing costs from near zero to 1 percent by the end of summer.
The head of the Atlanta Fed, Dennis Lockhart, said policymakers should soon begin thinking about tightening monetary policy, though he stopped short of calling for an imminent move.
And Dallas Fed President Richard Fisher said that while economic conditions do not call for tightening, "we need to be ready and we need to be ready to move fairly quickly".
Their comments suggest that firmer growth in the United States is making some policymakers nervous about keeping rates too low for too long, even as uncertainty mounts regarding European debt markets.
While Hoenig is considered one of the more hawkish members of the Federal Open Market Committee, the body known as the FOMC that sets official interest rates, Lockhart had until recently been quite dovish, tending to focus more on the economy's weak spots than its strength.
Even Hoenig, who is a voter on the FOMC this year and has dissented three times in favor of softening the Fed's pledge to keep rates low for an "extended period," seemed to be stepping up his calls for tighter policy.
Hoenig suggested the Fed first boost rates to 1 percent, pause to assess the effects of this tightening, and then proceed to raise them further up to above 3 percent "reasonably quickly." In addition, he called for the Fed to sell some of the mortgage assets acquired during the crisis at least by the time it pushes the benchmark federal funds rate up to 1 percent, even sooner. |
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