Fed should reconsider 'considerable time'
vow on rates: Fisher
Send a link to a friend
[October 11, 2014]
DALLAS (Reuters) - The Federal
Reserve should rethink its forward guidance, potentially ditching its
promise to keep interest rates near zero for a "considerable time" after
it ends its bond-buying stimulus, a top Federal Reserve official said on
"I feel it is time to reconsider 'considerable time,'" Dallas Fed
President Richard Fisher told reporters after a speech here. "I am
not sure if it provides real guidance."
The central bank, which has kept short-term U.S. interest rates near
zero since December 2008, uses the phrase "considerable time" in its
policy statements to convey that even after it stops adding monetary
stimulus through bond-buying, it will not immediately turn around
and start raising rates.
Those two words may be a focal point at the Fed's next
policy-setting meeting later this month, as policy-makers who want
to raise rates sooner rather than later face off against those who
The central bank has never officially said how long a pause it
envisioned. Fed Chair Janet Yellen signaled in March it could be
around six months, and Fed Vice Chair Stanley Fischer said Thursday
that it could be anywhere from two to 12 months. The Fed plans to
finish its bond-buying stimulus program later this month.
Fisher joins several other colleagues, including the hawkish chief
of the Philadelphia Fed, in urging a reworking of the guidance in
the Fed's statement.
Other U.S. central bankers, including San Francisco Fed President
John Williams, have said the phrase is still a useful signal to
markets that the Fed is not about to start jacking up rates
Fisher, speaking in Dallas, said he is "pleased" with the current
stability of prices, and wants neither deflation nor for inflation
to rise more than briefly above the Fed's 2-percent target.
[to top of second column]
But he reiterated his discomfort with the Fed's super-easy monetary
policy. The narrow gap between yields on risky corporate bonds
compared with yields on Treasuries, seen as among the safest of
assets, suggests "we may have overshot our mark," he told a group of
Labor market dynamics are improving and "not significantly
experiencing any inflationary pressure," he said, adding that he
expects economic growth to pick up over the next six months.
Fisher, 65, has a vote this year on the Fed's policy-setting panel,
and plans to retire next year.
(Reporting by Jon Herskovitz, writing by Ann Saphir; Editing by
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.