With the annual Jackson Hole, Wyoming, Economic Policy Symposium approaching this week, economists are expressing nervousness on whether the U.S. Federal Reserve will begin to raise interest rates before inflation sets in. With the U.S. unemployment rate at 6.2 percent in July — more than a full point lower than July 2013 — and private-sector earnings up 2 percent for hourly workers, a handful of Fed officials admit worry is justified, the Wall Street Journal reported Sunday.
“The idea that the Fed might get behind the curve is a powerful one, and that’s certainly been the history of the institution. People are right to worry about that,” St. Louis Fed President James Bullard told the Journal.
Arun Raha, chief global economist for Eaton Corp. (NYSE:ETN), the Cleveland industrial manufacturer, said he’s “nervous. Given the strength of the job market, manufacturing and nonresidential construction, it’s about time they got rid of their low-rates-for-an-extended-period viewpoint.”
Atlanta Fed President Dennis Lockhart said he thinks nothing should change until the economy is on a firm footing, but Allen Sinai, president of Decision Economics, said any move would be more effective if it were pro-active rather than reactive.
“We look for new clues on how the Fed plans to gain greater control of the Fed funds rate as it tightens policy, while the system is still swimming in reserves as a result of the three quantitative easing programs undertaken,” said Victoria Clarke, economist at Investec (LON:INVP).
Full article: Economists Nervous About When U.S. Federal Reserve Will Begin Raising Interest Rates Ahead Of Jackson Hole Symposium (International Business Times)