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 "I don't think it would be fair to say I have a date in mind or a
path in mind," for the appropriate timing of the Fed's first rate
increase, Kansas City Federal Reserve Bank President Esther George
told the Central Exchange, a group of women professionals. "We are
in a place now where we have to be very careful and think about how
we are beginning to withdraw stimulus."
George's reticence on her preferred path for rate hikes sets her
apart from her peers, who in recent days have shown an increased
willingness to voice their views. St. Louis Fed President James
Bullard, for instance, said he would want to see rate hikes begin in
early 2015; Chicago Fed President Charles Evans suggested he was
gunning for early 2016.
Indeed Fed Chair Janet Yellen started the ball rolling last week,
when she suggested there could be around a six-month gap between the
end of the Fed's bond-buying program and the start of rate hikes.
But with the Fed on track to keep buying bonds until the fourth
quarter, George told reporters, it is too early to set any schedule
for raising rates.
"I don't think you can do that. I don't know what will happen in six
months. We don't control the whole path," George told reporters. "We
are making a decision on asset purchases right now. Depending on how
that goes will determine the lift off in rates."
EXTRAORDINARY POLICY
The Fed has kept rates near zero since December 2008, and more than
quadrupled its balance sheet to over $4 trillion with an
asset-purchase program aimed at spurring borrowing, spending and
hiring.
Many Fed officials believe those policies have helped bring the
unemployment rate down from a recession high of 10 percent to its
current level of 6.7 percent.
In December the Fed took a first step toward unwinding its
super-easy policies, paring its bond-buying program and signaling it
would end it altogether later this year.
George is not usually one to hold back on her views. When it was her
turn to vote on the Fed's policy-setting panel, she used every one
of her votes to dissent from the Fed's policy easing, voting with
the majority only in December when the Fed began paring its bond
purchases.
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On Friday she said she continues to support the Fed's reductions in
bond-buying, and she also supports the decision to base any raise
rates on a "wide range" of factors rather than use a specific
unemployment rate benchmark.
But she also made clear that she differs from the majority of her
Fed colleagues in wanting to keep rates near zero for a
"considerable time" after bond-buying ends, and below normal even
once employment and inflation reach healthier levels.
"The risk I see is being too low for too long," she said.
George said she believes the economy is growing steadily and the job
market is "moving in the right direction."
She expects U.S. GDP to grow around 2.5 percent this year and closer
to 3 percent after that, fast enough to continue to bring down the
unemployment rate.
Companies, she said, are already finding it harder to hire qualified
workers, and upward pressure on wages should help bring inflation
back up towards the Fed's 2-percent target.
(Reporting by Carey Gillam; writing by Ann Saphir;
editing by Chizu
Nomiyama)
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