Official: Fed to wait to October to consider rate rise

Posted May 04, 2014, at 6:29 p.m.

DALLAS — The Federal Reserve will likely bring its massive bond-buying program to an end in October, and only after that will it consider when to raise U.S. interest rates, a top Fed official said on 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.”

U.S. unemployment registered 6.3 percent in April, a government report showed on Friday. But broader measures of the strength of the labor market, including the labor participation rate and hourly wages, indicated the jobs market is still far from strong.

More workers are dropping out of the labor force, data showed, suggesting that many saw job prospects too poor to merit a job hunt. Average hourly wages last month did not grow at all.

“It’s too early to tell,” Fisher said of when the economy will be ready for higher rates. “I’ll make this prediction: some time in the next 100 years, interest rates will go up.”

The Fed has kept short-term U.S. interest rates near zero since December 2008 and has bought trillions of dollars in long-term securities to help boost the economy and bring down unemployment.

Five months ago, with unemployment down sharply from its recession-era high around 10 percent, the Fed began cutting back on its monthly bond-buying stimulus.

Last week it continued that process, trimming its monthly purchases to $45 billion.

At the same time, the Fed has said it will keep rates near zero for a “considerable time” after it ends its bond-buying program so that it can assess the strength of the economy.

Fisher, who votes on Fed policy this year, has long wanted to end the bond-buying program and has warned that keeping rates too low for too long could feed unseen financial market bubbles.

 

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