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Fed officials suggest rate increase might be on the way

Jun 4, 2010 (CNBC/REUTERS)

Three top Federal Reserve officials said on Thursday it may soon be time to begin raising interest rates as the economic recovery in the United States gathers momentum, despite persistently high unemployment.

Thomas Hoenig, president of the Kansas City Fed, argued the U.S. central bank should raise benchmark borrowing costs from near zero to 1 percent by the end of summer.

The head of the Atlanta Fed, Dennis Lockhart, said policymakers should soon begin thinking about tightening monetary policy, though he stopped short of calling for an imminent move.

And Dallas Fed President Richard Fisher said that while economic conditions do not call for tightening, "we need to be ready and we need to be ready to move fairly quickly".

Their comments suggest that firmer growth in the United States is making some policymakers nervous about keeping rates too low for too long, even as uncertainty mounts regarding European debt markets.

"Based on the current outlook consensus, it seems reasonable that the economy would be well-positioned to accept this modest increase in the funds rate," Hoenig said in remarks to a business lunch in Bartlesville, Oklahoma, expounding on his view on raising the benchmark federal funds lending rate to 1 percent.

 



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