The impact of ending asset purchases on interest rates will likely be “modest,” Federal Reserve vice chairman Donald Kohn said Friday, although he said that judgment is subject to “considerable” uncertainty.
And while it would be “appropriate” to raise interest rates as the economy continues to gain momentum, Kohn repeated that short-term interest rates are likely to remain low for an “extended period” of time, provided that the economy follows the trajectory expected by the central bank.
In remarks prepared for delivery at the Federal Deposit Insurance Corporation’s symposium on interest rate risk management, the Fed vice chair also said when it comes time to raise rates, the pace, timing and size of such a move will be determined by the economic and inflation outlook.
Kohn went on to again note that the nation’s monetary policy and financial markets are both in “unchartered waters.”
— Market News International