Fed will likely end bond-buy stimulus in October -- Fisher

by Ryan Smith05 May 2014
The Federal Reserve will likely end its bond-buying stimulus program in October, and won’t consider raising U.S. interest rates until then, a Fed official said Sunday.

“I personally expect us to end that program in October,” Dallas Federal Reserve Bank President Richard Fisher said in an interview on Fox News. "Then we have to see how the economy is doing, including these broader measures of unemployment and where we stand before we can talk about how we might move the short-term rate.”

The unemployment rate was 6.3% in April, but that number could be deceptively low. Other measures of labor market strength, including average wages and labor participation rate, weren’t very encouraging. Wages were stagnant last month, and workers are dropping out of the labor force, suggesting that many now see a continuing job hunt as pointless, according to a CNBC report.

Fisher told Fox that it was still too early to tell when interest rates would rise.

“I'll make this prediction: Some time in the next 100 years, interest rates will go up,” he said.

The Fed has kept interest rates near zero since 2008 and has purchased trillions of dollars in Treasury and mortgage bonds as part of an effort to stimulate the economy. The program, called quantitative easing, led to near-record low mortgage rates at its height, and just the rumor last year that the Fed would trim its bond buys caused rates to shoot up by more than a percentage point, strangling the refi boom.

In December, the Fed began trimming its monthly bond buys, with the intention of slowly weaning the economy off the stimulus program. It continued that process last week, reducing monthly bond purchases to around $45 billion, CNBC reported.


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