Finance

Home page

Finance

Two Fed officials hint at interest rates rise

26 August 2016 08:43 (UTC +04:00)

Baku – APA-Economics. Esther George, president of the Federal Reserve Bank of Kansas City, laid out her case for raising short-term interest rates Thursday in an interview with The Wall Street Journal.

The Fed’s benchmark interest rate, the federal-funds rate, has been near zero for more than seven years and is negative when adjusted for inflation. Low rates risk causing imbalances in the financial system, including a booming commercial real-estate market, which could undermine the expansion, said Ms. George, a prominent skeptic of the Fed’s easy money policies who dissented at the central bank’s July policy meeting when officials declined to raise rates.

Inflation isn't far from the Fed’s 2% objective and the unemployment rate is low, meaning the job market is near what officials consider to be full employment. That presents an opportunity to push rates higher, she said.

Ms. George is looking to raise short-term rates to around 3% over the next two or three years, she said. However she added she doesn’t want to raise rates so much that the Fed slows down an already slow-growing economy.

Her overall economic outlook was modest, and so she supports Fed Chairwoman Janet Yellen’s plan to move rates up gradually. She described consumer spending and labor markets as bright spots in the economy, and wages are on the rise, but business investment remains disappointing, she said. She expects economic output to grow modestly this year, by just 2%.

Dallas Federal Reserve Bank President Robert Kaplan said the GDP will rise in the second half of 2016. He hinted that the interest rate will rise soon.