Tags: interest rates economy

Fed's Pianalto: Economy Needs Low Interest Rates

Friday, 19 Aug 2011 09:34 AM

Federal Reserve Bank of Cleveland President Sandra Pianalto said weak economic growth warranted a pledge to hold interest rates near zero until mid-2013.

“With my diminished outlook for economic growth, and my outlook for inflation to soon fall back to 2 percent, I was in favor of providing additional support to the recovery at last week’s FOMC meeting,” Pianalto said today in a speech in Columbus, Ohio.

“Under the circumstances, I think it made sense to take the unprecedented step of including that conditional guidance in our press statement,” Pianalto said at the Community Bankers Association of Ohio Annual Convention.

The policy-setting Federal Open Market Committee last week pledged to keep its benchmark interest rate near zero until at least mid-2013 to revive a recovery that it said is “considerably slower” than anticipated. The Fed made the rate pledge after Standard & Poor’s downgraded the U.S. government’s credit rating and Europe’s debt crisis worsened, roiling markets worldwide.

Pianalto, 57, became president of the Cleveland Fed in 2003. She is not a voting member of the FOMC this year and has never dissented from a FOMC decision. Fed presidents rotate voting on monetary policy, with Pianalto voting every other year.

“My latest forecast is for the economy to grow at a rate of about 2 percent this year, and about 3 percent in each of the next two years,” she said. “Our economy has to grow at about a 2 1/2 percent clip just to absorb new labor force entrants and to keep the unemployment rate from rising.”

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Federal Reserve Bank of Cleveland President Sandra Pianalto said weak economicgrowth warranted a pledge to hold interest rates near zero until mid-2013. With my diminished outlook for economic growth, and my outlookfor inflation to soon fall back to 2 percent, I was in...
interest rates economy
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2011-34-19
Friday, 19 Aug 2011 09:34 AM
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