From Jon Hilsenrath in the sj over the weekend: The Outlook: Federal Reserve Bets It Won’t Wait Too Long on Rates (gated)
Hilsenrath asks “Will the Fed fall behind the curve and keep interest rates too low for too long as the economy strengthens?”
- Says 30 surveyed economists fear the Fed will wait too long before raising short-term rates, while only 3 said the Fed would move too early
- More economists believe labor market slack is diminishing, making the US prone to inflation
- US Treasury’s fell in yield on Friday to a 14-month low, partially on ‘safe haven’ buying on geopolitical concerns
Hilsenrath concludes with:
Fed officials have made some subtle shifts. Ms. Yellen in July testimony to Congress said that if the economy continues to improve more quickly than expected, the Fed will raise rates sooner than expected. That means earlier than mid-2015 is possible.
Still, she and other top Fed officials believe they have been served well keeping the money spigots open in an economy that keeps disappointing. They will need some more proof before they heed the warnings of those who say they’re falling behind the curve.
