Thursday, November 21, 2013

Federal Reserve considers explicit pledge: Low rates if inflation stays down - The Washington Post

http://articles.washingtonpost.com/2013-09-23/business/42307809_1_low-inflation-federal-reserve-interest-rates

The Federal Reserve is leaning toward an explicit commitment to keep interest rates at rock-
bottom levels, as long as inflation remains low.
The pledge would be an attempt to strengthen assurance that the central bank will not tap the brakes on the recovery until it is certain that the momentum can be sustained. The Fed already has vowed not to raise rates — a move that would slow economic growth — at least until the unemployment rate falls to 6.5 percent or inflation rises above 2.5 percent.
It is strongly considering adding a third prong to that promise: not to move if inflation is below a certain target.

Above I have a link to the article but also I just pasted the article right on. The article is a little old but it still looked interesting to me. In the article it says that the Fed has vowed to not raise rates as long a inflation remains low. I feel like vow, commitment, are such a big promise to make, which is another word the article used to describe the Fed's persistence to keep the interest rates low. I think this will cause trouble for the Fed.

If inflation goes up I think the Fed will have to raise rates because what else can you do. I think the shouldn't have made such of a great vow because it could be really hard to keep, and they don't have complete control of inflation so there is never knowing what to expect. I also think that inflation goes up and the rates rise, people will get mad. I know that sounds stupid but even though the Fed said they would keep them low, if inflation stayed low, people will still be upset by the increase in rates. There are a lot of uneducated people in this world, and probably a lot on this topic, so I feel that they would blame the Fed for the raise in not only the interest rates but the inflation as well. I think it is really great that the Fed is trying to keep the rates low, but I think vow, commitment, and promise are promising too much.

1 comment:

  1. Ironically enough i did this article first marking period. I agree though, I don't think that they should have made such big promises., It is a very volatile situation and trying to make promises about that is difficult.

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