When should the Fed raise rates? (Hint – what I’ve been saying might be early…..)
by Tom on October 12, 2009
in Market Musings
An interesting analysis of what the Fed should do and when they should start raising rates. A couple of thoughts about it:
- Krugman, in saying that short term rates should say on hold for at least two more years, admits he’s using standard conventional analysis of the numbers.
- The standard, conventional analysis of the numbers doesn’t take into consideration the impact of what the government has done in borrowing boatloads of money in an effort to keep the economy moving.
So, would I be willing to guarantee that Krugman is right? Nope, not a chance. But given his track record, it seems to me to be significantly more likely that rates will stay the same (short term rates that is ) for longer rather than shorter time periods yet.
I’m still sticking with my 12 to 18 month estimation but this is pushing it out towards the 18 month end of things.
Tom Vanderwell
When should the Fed raise rates? (even more wonkish) – Paul Krugman Blog – NYTimes.com
Even so, unemployment should fall only 2.5 points, to 7.3. In other words, even with a really strong recovery (which almost nobody expects), the Fed should keep rates on hold for at least two years.
Technorati Tags: Fed, Paul Krugman, Interest Rates
