Fed's Williams warns continued low interest rates could spell trouble San Francisco Federal Reserve President John Williams is urging the development of new policies to fight low interest rates that threaten to make future downturns worse. Worldwide, central bankers have been frustrated with the global economy. Williams estimates U.S. short-term rates likely will rise to no more than 3.5 percent after the economy regains full health. (Reuters)
Yellen already a year ago, in October-November of 2015 recognized that the harm from low rates is equal to the benefit. However, I guess, the rate increase in December of 2015 and following deep correction in January 2016 scared everyone. Investment institutions still may get cheap money and pump the stocks, corporation still may get cheap money and buyback stocks. How does it helped the economy? Read the full Williams letter at http://www.frbsf.org/economic-resea...licy-and-low-r-star-natural-rate-of-interest/ and judge by yourself. Just a few lines: "The time has come to critically reassess prevailing policy frameworks and consider adjustments to handle new challenges, specifically those related to a low natural real rate of interest. " "other words, we can wait for the next storm and hope for better outcomes or prepare for them now and be ready" "In this new normal, recessions will tend to be longer and deeper, recoveries slower, and the risks of unacceptably low inflation and the ultimate loss of the nominal anchor will be higher" "we are seeing the future now and have the opportunity to prepare for the challenges related to persistently low natural real rates of interest." Now when election just a few months away, the Democratic FED will do everything including keeping rate low, just to avoid even a medium correction. You should remember 2008 lesson - unemployed and financially broken people will not vote for a party in power in time of a recession. FED pushes itself further in the corner...