According to a leading U.S. Federal Reserve official, the central bank may likely increase short-term interest rates about six months after the end of its bond-buying economic stimulus.
Federal Reserve Bank of Atlanta President Dennis P. Lockhart said on Tuesday that he thinks Fed Chair Janet L. Yellen’s recent comments represent the earliest time the Fed would start increasing benchmark rates from near-zero levels. Last week, Yellen said at a press conference that it may be a “considerable time” before the central bank raises rates, though she added that this could mean six months after the end of the so-called “QE3” (third round of quantitative easing) stimulus. This had resulted in volatile stock market gyrations, but according to Lockhart, it may be “longer than that” before the Fed increases overnight interest rates, which have been at near-zero levels since the latter part of 2008.
The centrist Lockhart, however, was quoted as saying that his statements reflect his personal standpoint, and not that of the central bank. Lockhart does not have a vote this year on the Federal Open Market Committee, but has been quite participative in the Fed’s meetings, with his comments showing some congruence with those of the Fed’s top movers and shakers.
Mortgage interest rates have been at near-zero for over five years in an effort to stimulate the U.S.’ then-moribund economy, but recent job market statistics have spurred the Fed on to start cutting back on its bond purchases. Previously made to the tune of $85 billion per month since September 2012, the Fed started dialing down its purchases by $10 billion per month, with the current monthly pace of stimulus now at $55 billion.