Looking Forward to Rising Rates in 2015

January 5th, 2015

Charles Plosser, President of the Federal Reserve Bank of Philadelphia, has been a long time critic of the Federal Reserve Board of Governor’s decision to prolong near zero interest rates this year.  Despite improving economic performance over the past four quarters and record low unemployment in labor market, the Federal Reserve has yet to raise interest rates.  However, 2015 is likely to bring rate hikes, especially as inflation gets closer to its annual two percent target.

Today, December 31, 2014, Plosser, along with Michael Dotsey, Senior Vice President and Director of Research, and Keith Sill, Vice President and Director of Data Research, published a monetary policy report, Using Rules for Benchmarking. The report finds that the longer the Federal Reserve delays raising interest rates the more aggressive the rate hikes will need to be, stating, “Delaying liftoff well into 2015 runs the risk of requiring more aggressive future monetary policy than would otherwise be needed.”

 

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