Fed officials warn of further rises
Amercian Federal Reserve officials left little doubt that the bank has more rate increases in mind, but tightening of monetary policy looks likely to continue in small steps unless inflation flares up.
Approaching the first anniversary of the Fed‘s program of “measured” increases in short-term rates, Chicago Fed President Michael Moskow said the bank‘s policy remains accommodative.
Separately, Atlanta Fed President Jack Guynn said the Fedhas “not yet reached a neutral policy stance.”
Fed Gov. Edward Gramlich, speaking in Paris, said the measured rate increases could continue.
The federal funds rate is currently 3.0 per cent, up from 1.0 per cent when the bank started its program of raising rates in June 2004.
The 3 percent to 5 percent zone is often described as a neutral “range” for federal funds, although Fed officials dislike being pinned down on a specific level. A neutral rate neither stimulates nor suppresses economic growth.
Echoing Supreme Court Justice Potter Stewart‘s famous comment on obscenity, Fed Chairman Alan Greenspan said of neutrality last week, “We‘ll know it when we see it.
The economy is on a solid growth path, with future growth likely to be in the vicinity of the 3.5 percent reported for the first quarter, he said.
Despite high energy prices, core U.S. inflation remains lowand longer-term inflation expectations are well contained,policy-makers said.
The U.S. central bank was not yet done raising interest rates but would watch economic data closely and stay vigilant to any surge in inflation.
Federal Reserve Governor Susan Bies took on the “conundrum”of low long-term U.S. interest rates in comments to reporters after speaking at a Women in Housing and Finance event inWashington.
Longer maturity interest rates have fallen sharply since the Fed embarked on its tightening program at the short end ofthe yield curve. Yields on 10-year notes are currently at 4.08 per cent, down from about 4.70 per cent in June 2004 when the Fed started raising rates.
The long rates puzzle dovetails into another worry forpolicy-makers, a hot housing market that has recently attracted the kind of speculative cash associated with stock market bubbles of yore.
Officials repeated concerns about real estate speculation but once again stopped short of tagging the current situation a”bubble.”
Approaching the first anniversary of the Fed‘s program of “measured” increases in short-term rates, Chicago Fed President Michael Moskow said the bank‘s policy remains accommodative.
Separately, Atlanta Fed President Jack Guynn said the Fedhas “not yet reached a neutral policy stance.”
Fed Gov. Edward Gramlich, speaking in Paris, said the measured rate increases could continue.
The federal funds rate is currently 3.0 per cent, up from 1.0 per cent when the bank started its program of raising rates in June 2004.
The 3 percent to 5 percent zone is often described as a neutral “range” for federal funds, although Fed officials dislike being pinned down on a specific level. A neutral rate neither stimulates nor suppresses economic growth.
Echoing Supreme Court Justice Potter Stewart‘s famous comment on obscenity, Fed Chairman Alan Greenspan said of neutrality last week, “We‘ll know it when we see it.
The economy is on a solid growth path, with future growth likely to be in the vicinity of the 3.5 percent reported for the first quarter, he said.
Despite high energy prices, core U.S. inflation remains lowand longer-term inflation expectations are well contained,policy-makers said.
The U.S. central bank was not yet done raising interest rates but would watch economic data closely and stay vigilant to any surge in inflation.
Federal Reserve Governor Susan Bies took on the “conundrum”of low long-term U.S. interest rates in comments to reporters after speaking at a Women in Housing and Finance event inWashington.
Longer maturity interest rates have fallen sharply since the Fed embarked on its tightening program at the short end ofthe yield curve. Yields on 10-year notes
The long rates puzzle dovetails into another worry forpolicy-makers, a hot housing market that has recently attracted the kind of speculative cash associated with stock market bubbles of yore.
Officials repeated concerns about real estate speculation but once again stopped short of tagging the current situation a”bubble.”
May 27, 2005
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