Fed's George Wants to Raise Short-Term Rates
August 25 2016 - 11:00PM
Dow Jones News
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.
Her views about the economy haven't changed much since then,
when she was prepared to push rates up, she said. The Fed has held
its benchmark rate in a range between 0.25% and 0.5% since
December. Several officials have said they expect to raise it this
year, but haven't agreed on when to act.
"Today my views are it is time to move," she said. "Where I was
in July made sense to me and it still makes sense to me."
"I don't see better outcomes from waiting."
Ms. George was speaking on the sidelines of the Fed's annual
retreat in Jackson Hole, Wyo. The Kansas City Fed hosts the event,
which makes her the master of ceremonies.
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.
"I look at it in the context of removing accommodation," she
said.
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%.
All in all, she said, "the data look alright to me."
Write to Jon Hilsenrath at jon.hilsenrath@wsj.com
(END) Dow Jones Newswires
August 25, 2016 22:45 ET (02:45 GMT)
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