Fed should raise rates when taper complete, official says

by Ryan Smith04 Jun 2014
A Federal Reserve official official says she wants to raise interest rates as soon as the Fed finishes tapering its bond buys.

Speaking at an event in Breckenridge, Ohio, Kansas City Fed President Esther George said that given recent economic growth, “it will likely be appropriate to raise the federal finds rate somewhat sooner and at a faster pace.”

The Fed has kept interest rates near zero since 2008. Most Fed officials think those low rates will be in place until some time in 2015, the Wall Street Journal reported. George, however, thinks the Fed should consider raising rates as soon as its bond-buying stimulus comes to a close.

The bond-buying plan, called quantitative easing, began to wind down in December. At its height, the program helped push mortgage rates to near-record lows.

Currently, the Fed is purchasing $45 billion per month in Treasury and mortgage bonds, according to the Journal. it will likely wind down the taper completely late this year. At that point, George said, the agency should consider normalizing monetary policy.

“My concern is that keeping rates very low into late 2016 will continue to incentivize financial markets and investors to reach for yield in an economy operating at full capacity, posing risks to achieving sustainable growth over the longer run,” she said.
 

COMMENTS

  • by Tony | 6/4/2014 10:42:36 AM

    It's hard enough to get mortgages done now as it is with some of the guidelines, raising interest rates will just run the public off again, the lenders will start offering very low adjustable rates for 2 or 3 years and the next thing you know it's 2009 all over again, I would love to see the powers in charge, the one's who make these insane rules try to close a mortgage, instead they sit in their little perches with no idea of how to do a purchase mortgage let alone a refinance, why don't these people go out into the field and see what is really going on instead of just looking at numbers that can be manipulated, the government has taken the mortgage business to the level of used car sales, please wake up and get out in the field and talk to the people that are doing the mortgages and fighting with the underwriters, better yet how about all of the people that manipulate the numbers try to get their mortgage broker license, try to understand the mortgage business because as of now, the number manipulater' s do not have a clue on what they are talking about.

Poll

Is TILA-RESPA a good or bad thing long term?