WASHINGTON — Federal Reserve Governor Elizabeth Duke Tuesday said she would like to see higher interest rates, but only in an environment where the economy is also growing strongly.
Speaking at an American Bankers Association gathering, Duke also said in prepared remarks that the economy is indeed strengthening, "particularly the housing market," though she noted that the reason "housing prices are going up probably has to do with a shortage of houses on the market."
While most of her remarks were on community banking, in an audience Q&A session afterwards Duke said she would "very much like to see higher rates if the rates are higher because the economy is stronger."
"I do know how difficult it is to work in a low rate environment," Duke, a former community banker herself, noted, but emphasized that "low rates have been very helpful in terms of borrowers making payments."
In the current low interest rate environment, Duke "is very much aware of reaching for yield behavior" by banks, and the Fed is "monitoring this very closely."
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