|
 The comments from St. Louis Fed President James Bullard and Dennis
Lockhart of the Atlanta Fed, though not ground breaking, did
reinforce the notion that accommodative monetary policies would
remain in place for a while to come despite intense market
speculation over the timing of tightening.
Bullard, speaking to reporters at his branch of the U.S. central
bank, said a formal rate rise is "still a considerable distance
away." Last week, he told Reuters the hike should come in the first
quarter of next year, among the most hawkish predictions of the
Fed's 16 policymakers.
Lockhart, who like Bullard does not have a vote on Fed policy this
year but nonetheless participates in the discussions, said the
economy needs to be growing at roughly 3 percent to justify a hike
in the second half of next year.
Speaking in Miami, Lockhart said he thinks the economy will perform
that well beginning in the current quarter and continue that trend
in coming quarters. The faster growth would help some part-time
workers get more hours at their jobs and goad more people who are
out of work to restart their job hunts, he said.
Both Lockhart and Bullard repeated that signs of weak growth in the
first quarter would likely prove temporary because they were due to
a severe winter, with Bullard warning it would take "several months"
to understand the extent of the weather-related slump.
The Fed is just beginning its trickiest policy reversal ever, having
started in January to reduce the pace of its aggressive and
stimulative bond-buying program, which is set to expire by December
at the latest.
Last month, the Fed said it would be a "considerable period" between
the end of the asset purchases and the beginning of interest-rate
hikes. But then Fed Chair Janet Yellen added the period could be
"six months or that type of thing," triggering a market selloff and
prompting futures traders to predict the hike will come in June of
next year.
[to top of second column] |
The Fed also said that, in the longer run, it expects to keep its
target federal funds rate below normal levels even after employment
and inflation reach the central bank's goals.
Asked about this line in the policy statement, Bullard said "real
interest rates look low, and look like they'll continue to be low."
While there are competing theories as to why this may be the case,
he said the best explanation was simply this: "There's just a lower
real interest rate environment that's been going on for a long time
and therefore the real component of the federal funds rate will be
smaller, and that's pulling the normal funds rate down."
The Fed has kept its key rate near zero since late 2008 to battle
the recession, helping create an unprecedented period of low
borrowing costs across the world's largest economy.
Lockhart said quicker growth should be a key variable for the Fed
raising its key rate.
"If that progress fails to materialize, a later liftoff date than I
am assuming will likely be appropriate," he said.
(Additional reporting by Jason Lange in Washington;
editing by
Meredith Mazzilli)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
