Tags: David Stockman | Federal Reserve | rate | hike

Stockman: Fed Should Raise Interest Rates Next Week

Stockman: Fed Should Raise Interest Rates Next Week
(Photo: Dollar Photo Club)

By    |   Thursday, 10 September 2015 06:00 AM

It's well past time for the Federal Reserve to begin raising interest rates, says David Stockman, White House budget director under President Reagan.

He notes that the unemployment rate registered 5.1 percent in August, the lowest in seven year years and in the lowest quintile over the last 45 years. The 5 percent level is considered full employment by many economists.

"We are effectively in the end zone, and these clowns are sitting there debating whether or not we can let the rate go above zero," Stockman told Bloomberg.

The Fed has kept its target for the federal funds rate at a record low of zero to 0.25 percent since December 2008. Central bank officials have indicated that they are likely to begin raising the rate this year, and many economists expect the Fed to act in September or December.

"What we need is to get a central bank under control that allows Wall Street to discover prices based on supply and demand," Stockman says.

Nobel laureate economist Joseph Stiglitz disagrees with Stockman, arguing that the Fed should refrain from tightening in September.

"It is as close to a no-brainer as such decisions can be," the Columbia University economist writes on Project Syndicate. "Now is not the time to tighten credit and slow down the economy."

The Fed under its dual mandate pursues full employment and stable prices. "It has been more than successful at the second, partly because it has been less than successful at the first," Stiglitz says.

Non-farm payrolls rose just 173,000 in June. Meanwhile, the Fed's favored inflation gauge climbed only 0.3 percent in the 12 months through July.

The central bank has kept short-term interest rates at record lows near zero since December 2008. Fed officials have said they will likely start boosting interest rates this year.

"The usual argument for raising interest rates is to dampen an overheating economy in which inflationary pressures have become too high," Stiglitz says. "That is obviously not the case now."

The Atlanta Fed's forecasting model puts third-quarter growth at just 1.5 percent.

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It's well past time for the Federal Reserve to begin raising interest rates, says David Stockman, White House budget director under President Reagan.
David Stockman, Federal Reserve, rate, hike
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2015-00-10
Thursday, 10 September 2015 06:00 AM
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