Federal Reserve Chairman Ben Bernanke noted last year that interest rates wouldn’t rise until the unemployment rate falls to 6.5 percent – of course, it would depend on how the United States would get to that projected level. It was forecasted at the time that the jobless rate target would happen sometime next year. A Fed insider now delayed it by another year.
Speaking during a presentation to the Portland Community Leaders, John C. Williams, president and CEO of the Federal Reserve Bank of San Francisco confirmed that interest rates wouldn’t experience any hikes until at least in late 2015.
“Based on my current forecast, I don’t expect the economy to reach 6½ percent unemployment until the first half of 2015, and I don’t expect the FOMC to raise rates until later that year,” stated Williams. “So monetary policy will continue to be extraordinarily stimulative for quite some time.”
Williams had also listed the various accomplishments that the Fed has made, including job creation. He said that the U.S. has created 200,000 jobs per month. Unfortunately, as David Stockman, former budget director in the Reagan administration, explained, most of the job additions have been part-time work and that they aren’t new but rather the same jobs produced between 2000 and 2007 that were lost at the height of the economic collapse.
In addition, the Fed president also took credit for the rise of the stock market and real estate prices. What Williams didn’t confirm was that the central bank has been pumping so much money into the system that it’s costing $85 billion per month just to have the Dow Jones at 14,000.
“I am convinced that our policies have been instrumental in reviving the economy and avoiding what could have been an economic meltdown,” concluded Williams. “But the time is approaching when our economy will have enough momentum on its own without the need for additional monetary stimulus. This is undeniably welcome news. Although the road ahead will likely be bumpy at times, with some twists and turns, I am confident that we will be able to navigate successfully the eventual normalization of monetary policy and achieve our goals of maximum employment and price stability.”
On another note, it has been reported that Larry Summers is currently the heavy favorite to be the next Fed Chair.