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Fed’s Yellen Says Interest Rates May Stay Near Zero for Years

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Vivien Lou Chen
Bloomberg
Wednesday, July 1, 2009

Federal Reserve Bank of San Francisco President Janet Yellen said the prospect that policy makers will leave the benchmark U.S. interest rate near zero for the next several years is “not outside the realm of possibility.”

“We have a very serious recession, we have a 9.4 percent unemployment rate,” and inflation possibly falling over time below the Fed’s preferred level, she told reporters yesterday after a speech to the Commonwealth Club of California in San Francisco. Given the recession’s severity, “we should want to do more. If we were not at zero, we would be lowering the funds rate.”

Yellen’s comments go beyond those made by other policy makers after a June 23-24 meeting, when they said the federal funds rate will likely stay at “exceptionally low levels” for “an extended period.” They have held the rate, also known as the overnight lending rate between banks, at between zero and 0.25 percent since December.

The Fed “did succeed in averting a full-blown meltdown,” Yellen said in the speech. Nevertheless, the threat of another financial shock, such as one from falling commercial real-estate prices, is “high on my worry list.”

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This article was posted: Wednesday, July 1, 2009 at 3:59 am





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