US Economists Urge Fed To Raise Rates 'Promptly'
15 Apr 11:25
WASHINGTON (Dow Jones)--A group of economists famous for their anti-inflation
hawkishness Monday urged the Federal Reserve to raise interest rates promptly,
saying the rapid U.S economic rebound has enlarged the risk of inflation.
"The recovery is well underway, and the risks of higher inflation are
growing," the Shadow Open Market Committee said.
It said Fed interest rates, adjusted for inflation, are now below zero and
are "incompatible with stable, low inflation and a sustained healthy economic
expansion."
Mickey Levy, a Bank of America economist who is a committee member, said he
expects the economy to grow as much as 5% this year, up from 0.5% last year.
Inflation this year should moderate, he said, but it could rise in the longer
term.
"The Fed must promptly raise short-term rates," Levy said. "Failure to do so
on a timely basis risks exacerbating future swings in interest rates and
nominal aggregate demand, generating more erratic economic performance."
The Fed cut its key federal-funds rate to a 40-year low of 1.75% last year as
the economy slipped into its first recession in a decade.
Now that the economy is growing again, Wall Street widely expects the Fed to
start raising rates this summer.
The Shadow Open Market Committee said the rate increases "will not adversely
affect the recovery."
The committee also urged the International Monetary Fund not to make new
loans to Argentina, until that country's "internal problems are addressed."
It said Argentina "has failed to address its structural and fiscal problems,
and its economic prospects remain dismal."
-By Joseph Rebello, Dow Jones Newswires; 202-862-9279;
joseph.rebello@dowjones.com
(END) DOW JONES NEWS 04-15-02
11:25 AM |
