Rate hike decision splits Fed

In the Fed’s FOMC minutes, it has been maintaining that rates will be kept at an exceptionally low levels for an extended period.  So the expectation is, the rate would stay where it currently stands for some time.  But in a NYT story today, it seems that it ain’t all peaceful in Bernanke’s family.  There is a divide concerning when the central bank should begin raising interest rates.  Reserve Bank of Australia has already gone ahead and bring up its rate from 3.90 to 3.25.  Perhaps the more stable, less affected developed countries would also follow soon.  But apparently it isn’t the case for the US.

Anyway, in separate occasions, some Fed presidents have spoken about their belief that the Fed must act soon.  In the case of Kevin Warsh, Fed governor, he believes the Fed cannot afford to wait for irrefutable signs that a recovery is on its way.

Kansas Fed President said Tuesday: “My experience tells me that we will need to remove our very accommodative policy sooner rather than later. Even if we were to start immediately, much time would pass before incremental increases could be considered tight or even neutral policy.”

His supporters include Dallas Fed President Richard Fisher, Richmond Fed President Jeffrey M. Lacker, Philadelphia Fed President Charles I. Plosser, and the previously mentioned Fed Governor Kevin M. Warsh.

Source: NYT


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