WSJ: time to raise rates for the Fed?
Wall Street Journal reports that the a study performed by the Federal Reserve’s staff members finds that the best time to start lifting the fed funds rate from near zero is… right now, in Q4, 2014. The US benchmark rate should be increased to 1.4% by Q4, 2015, to 2.6% by Q4, 2016, and to 3.5% by the end of 2017.
The Fed’s staff uses a model called FRB/US to simulate a path for the federal funds rate that results in the quickest possible return to low unemployment and stable inflation around 2%. According to WSJ, the Chair Janet Yellen pays attention to these studies. However, Yellen warned that the Fed shouldn’t put too much weight on these simulation exercises as the models are imperfect and subject to change.Still, we can see that the Fed now is definitely coming closer to raising rates.