Tags: Fed | Rate | Promise | Kroszner

Former Fed Governor Kroszner: Fed's 2014 Rate Promise Hard to Keep

Monday, 26 Mar 2012 07:43 AM

Former Federal Reserve Governor Randall Kroszner thinks it will be harder for the Fed to stick to its promise of low rates through late 2014, in part because of the lengthy time period.

The Fed was doing a better job when it was promising rates would stay low only a few months ahead,as it did the previous summer, Kroszner told CNBC.

Going out to 2014 is supposed to be convincing to the markets, but bond buyers now are nervously eyeing signs of recovery. Rates popped higher briefly in the past week in response to improved labor numbers and a rising stock market, then fell back.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

"They achieved a lot over the summertime when they said they were going to hold interest rates low until mid-2013, markets moved exactly there. When you try to put the horizon out that long until late 2014, three years, it's a little bit tougher," Kroszner said.

Part of the problem facing U.S. Federal Reserve Chairman Ben Bernanke is that his own Fed members are breaking ranks, giving speeches and interviews in which they warn of the risk of continuing with virtually zero interest rates.

The latest is Federal Reserve Bank of St. Louis President James Bullard, who told Bloomberg Television that holding rates too low for too long risks sparking inflation.

"Once inflation gets out of control, it takes a long, long time to fix it," Bullard said.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

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