CNBC Commentator Ron Insana thinks that maybe it’s time to stop waiting for the Federal Reserve to hike interest rates.
Why continue to wait for a train that isn’t showing up, he asks.
“The Fed declined to raise interest rates despite recent improvements in the economy. At the very same time, the Fed lowered the long-run outlook for inflation growth and interest rates,” he wrote for CNBC.com.
Fed policymakers voted 7-3 on Sept 21 to hold steady the target rate for overnight lending between banks at 0.25 percent to 0.5 percent. Fed Chair Janet Yellen said it was likely a rate increase would come by year's end. The Fed last raised rates in December, increasing them by a quarter point to end seven years of near-zero interest rate policy.
Unemployment registered 4.9 percent in August, below what many economists view as sustainable in the long run, and most Fed officials expect it to fall further.
Inflation has run well below the Fed's 2 percent target for four years.
“Why doesn't the Fed just plainly state that in the aftermath of a massive financial crisis, a Great Recession, numerous global weak spots and persistent financial, technological and demographic deflation, that policy is on hold until inflation is persistently at, or slightly above, the Fed's 2 percent target, while acknowledging that a low unemployment rate is simply not as inflationary as it once was?” he asked.
Fed Chair Janet Yellen and her colleagues are creeping toward raising interest rates for the first time this year as they nurse the U.S. economy through a period of sluggish growth and low inflation, Bloomberg reported.
Officials judged at their Sept. 20-21 meeting that the case for a rate rise had strengthened, but “decided, for the time being, to wait for further evidence of continued progress” toward the central bank’s inflation and employment goals.
Investors see a roughly one-in-two chance of a move in December by the policy-setting Federal Open Market Committee, and Fed officials’ own forecasts project one move this year, based on their median estimate.
The decision last week to keep rates steady split the FOMC. Three regional Fed presidents dissented from the vote to hold rates unchanged in favor of a hike, the first time since 2011 that had happened. The target range for the benchmark federal funds rate has been kept at 0.25 percent to 0.5 percent since December, when it was raised by a quarter point after seven years trapped near zero.
“So, fine. Leave it that way. Let's stop talking in riddles, propounding paradoxes or speaking in tongues,” he said. “The economy is partially where it should be and partially not,” he said.
“The world's central bankers simply have to admit that, absent a huge, and positive, shock to the global economy, whether that's large scale fiscal stimulus, a massive increase in productivity, or a revolutionary new technology that drives widespread growth and prosperity, this is where rates will be, at least through the first half of 2016,” he said.
“They will change when the world begins to fully normalize.”
Meanwhile, one central bank official recently said he thinks the Fed made the "right move" in deciding last week to leave interest rates unchanged because inflation remains low and more workers are returning to the labor force.
"That to me suggests we have time before we need to adjust rates," Minneapolis Fed President Neel Kashkari told reporters after a symposium on banking regulation at his bank's headquarters, Reuters reported.
"I do think that was the right move. I supported the decision in the meeting," Kashkari said. "It seems to me that the risks of too low inflation are greater than the risks of too high inflation."
(Newsmax wire services contributed to this report).
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