John Ryding, former chief economist at Bear Stearns, says the Federal Reserve won’t raise interest rates before 2011.
The federal funds rate is now at zero to 0.25 percent, and most economists expect an increase in 2010, but Ryding, now chief economist at RDQ Economics, sees it differently.
The Fed is focusing on employment, under the guise of resource utilization, low inflation, and low inflation expectations, Ryding told the Financial Times.
With the jobless rate now at 10.2 percent, “you start doing the GDP math, and you say, how fast does this economy have to grow to get up toward levels that would worry the Fed?” Ryding says.
“We could grow 5 percent for a couple years now, and it wouldn’t bother the Fed.”
With most economists expecting 3 percent growth going forward, unemployment won’t fall much, he says.
“If that’s the case, that excess degree of underutilized resources will persist, and the Fed’s going to keep rates on hold.”
Ryding says gold will keep rising.
“The Fed’s decision to ignore the message of the weaker dollar and stick with these economic variables like unemployment means gold goes higher and the dollar will get weaker.”
Others are bullish on gold too.
“People want to own gold now, because gold is the ultimate currency,” Gijsbert Groenewegen, a partner at Gold Arrow Capital Management, told Bloomberg.
“With such low interest rates, the dollar is being allowed to weaken, and there’s no incentive to hold it.”
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