NEW YORK – Noting the “tremendous slack” in the economy, former Federal Reserve Board Governor Frederic Mishkin said, the Fed should not be thinking about hiking interest rates.
“It does not make sense at this juncture to think about raising interest rates,” with “tremendous slack” in the economy, a weak recovery and “inflation on the low side,” he said in an interview on CNBC this morning.
Mishkin added that the Fed raising the discount rate was misinterpreted by people, who thought that meant higher Federal funds rates would follow. But, he noted, Fed speakers including Reserve Board Chairman Ben S. Bernanke have gone out of their way in speeches to reiterate that FFR would remain exceptionally low for an extended period.
While the Fed is “getting back to normalcy” by exiting “from extraordinary actions and policy tools,” monetary policy is a separate issue.
