Fed's Olson Says U.S. Interest Rates Still Need to Rise

Published on:
12 September 2006 at 10:18 a.m. ET

Written by: Unknown Author –

http://www.insidearm.com/news/00002181-feds-olson-says-us-interest-rates-still-n/

U.S. interest rates still need to rise to reach a level that would be consistent with a sustained, noninflationary economic expansion, Federal Reserve Board Governor Mark Olson said on Monday.

Olson said the U.S. central bank’s decision last week to raise overnight borrowing costs by a quarter-percentage point to 2 percent brought them, when adjusted for inflation, to “just above zero,” which he said was “considerably lower than the long-run average of about 2-3/4 percent.”

“Even taking into account possible factors that would tend to push down the equilibrium rate — for example, business pessimism, energy prices, and our net export position — the real funds rate still seems low,” he said at a luncheon sponsored by Fraser Institute, a Canadian think tank.

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Fed's Olson Says U.S. Interest Rates Still Need to Rise

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