Keeping interest rates near zero for too long may result in "financial imbalances and instability" that increase rather than decrease unemployment, according to Federal Reserve Bank of Kansas City President and Chief Executive Officer Esther L. George.

While backing the Fed's aggressive response to the recession, George warned, in the long term "the FOMC must weigh the benefits and the risks of maintaining an unusually accommodative monetary policy stance for a protracted period. Like others, I am concerned about the high rate of unemployment, but I recognize that monetary policy, by contributing to financial imbalances and instability, can just as easily aggravate unemployment as heal it. Economic models tend to highlight the benefits of such a policy, but cannot fully account for the future risks."

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