Bernanke: Fed in no hurry to raise short-term rates
For saying what was known, the market overreacted again. At least they admitted that the labor market is weak
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The Federal Reserve will not be in a hurry to raise short-term interest rates, even after the unemployment rate falls to the central bank’s threshold of 6.5%, Fed Chairman Ben Bernanke said Wednesday.
“There will not be an automatic increase in interest rate when unemployment hits 6.5%,” Bernanke said in the question-and-answer session of a speech to economists.
Given the weakness of the labor market, and low inflation “it may be well sometime after we hit 6.5% before rates reach any significant level,” Bernanke added.
U.S. stock futures rose on the comments, with the S&P 500 SPU3 +0.44% contract tacking on about 0.7%.
The Fed chairman sounded several dovish notes. He said that the unemployment rate probably understates the weak condition of the labor market.
And he stressed that the Fed was concerned about the current very low inflation rate.
If inflation does not move up closer to the central bank’s 2% target, “that would be a good reason to remain accommodative,” he said.
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