Wall Street Journal (11/13/13) Jon Hilsenrath
U.S. Federal Reserve officials are considering whether to boost their commitment to keep short-term interest rates near zero as part of their work to grow the economy. The Fed repeatedly has stated it won’t raise short-term interest rates from near zero until the unemployment rate declines to below 6.5%. However, the Fed is now considering keeping rates low until the unemployment rate declines to 5.5%.
“The labor market remains disturbingly weak. The good news is that, with low inflation, the [Fed] has considerable monetary-policy capacity at its disposal with which to address this problem,” says Minneapolis Fed President Narayana Kocherlakota. Some Fed officials think the threshold should be lowered because the unemployment rate may be overstating the improvement in the labor market, which may be the result of people leaving the labor force altogether.
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