Fed Official: Jobless Rate Seen Falling Below 6% This Year

Before you go, we thought you'd like these...
Fed's Bullard says U.S. jobless rate expected to fall below 6 percent this year
Brennan Linsley/APJob seekers at a job fair in Denver.
By Michael Flaherty

HONG KONG -- The U.S. unemployment rate will fall below 6 percent by the end of this year, a Federal Reserve official said Wednesday, offering a bullish view on the country's economy after central bank comments sent shock waves through financial markets last week.

James Bullard, president of the Federal Reserve Bank of St. Louis, said that the outlook for the U.S. economy is "quite good," despite data from early in the year.

"The biggest thing is that unemployment has come down more quickly than expected," said Bullard, speaking on a panel at the annual Credit Suisse (CS) investor conference in Hong Kong.

He added later during a question and answer session that more progress is needed in the labor market before U.S. policymakers can consider raising interest rates.

Bullard is known to be one of the Fed's more hawkish policymakers. He previously advocated for a rate hike as early as 2014, a stance he appears to have backed away from.

U.S. monetary policy tightening took center stage last week after a two-day policy meeting, when the Fed said it expected to keep benchmark interest rates near zero for a "considerable time" after it wrapped up a bond-buying stimulus program, which it is widely expected to do toward the end of the year.

Pressed on the statement at a news conference afterward, Fed Chairman Janet Yellen said the phrase "probably means something on the order of around six months or that type of thing." %VIRTUAL-article-sponsoredlinks%Stocks and bonds immediately tumbled as traders took the statement to suggest rate hikes could come sooner than they had anticipated.

Bullard has joined other Fed officials in playing down the "six months" comment from Yellen, saying it was in line with what the private sector was anticipating. He repeated that view Wednesday.

The unemployment rate for February rose to 6.7 percent from a five-year low of 6.6 percent as Americans flooded into the labor market to search for work. But the rate hovering around the Fed's previous 6.5 percent benchmark has raised the prospect of the central bank moving to push up rates more quickly than some in the market previously expected.

Fed officials appear increasingly worried that keeping policy so easy for so long could encourage investors to take too many risks, building bubbles that may eventually pop and roil financial markets.

The U.S. economy is "set for a pretty good year," Bullard said Wednesday. "Despite the spate of weaker data in the January, February time frame."

The Fed has held rates near zero since late 2008 to help the economy recover from the 2007-2009 recession.

Bullard was asked about where he saw interest rates in 2016, at which point he referred to his "dot."

The Fed introduced a "dot chart" in its January 2012 economic projections. Each dot represents the view of an individual policymaker on how they see the appropriate level of interest rates for the coming few years.

"I'm here to tell you that my dot has not changed," Bullard said.

Data on Tuesday showed U.S. consumer confidence surged to a six-year high in March and house prices increased solidly in January, positioning the economy for stronger growth after a weather-induced soft spot.

-Additional reporting by Saikat Chatterjee and Twinnie Su.

Fed Official: Jobless Rate Seen Falling Below 6% This Year
Interest rates are low, but that's no excuse to accept 0.01 percent interest rates on your savings. Just a little shopping can find you many FDIC-insured savings accounts paying as much as 1 percent in interest, usually with no fees and easy availability to your money through electronic funds transfers. Compared to the near-zero rates that uninsured money-market mutual funds and other alternatives pay, high-interest savings accounts are a much safer way to save.
Banks still try to get customers to pay more for less, with one recent threat to charge fees for basic deposit accounts if the Federal Reserve cuts interest rates further. But many online banks not only offer fee-free options on their checking and savings accounts but also pay interest, and many have extensive fee-free ATM networks or reimbursement arrangements. If your bank follows through on threats to raise fees, taking your business elsewhere is your best move.
Bankrate reports that the average credit card charges around 16 percent in interest. That's a guaranteed money-maker for the banks that issue cards, but a big loser for those who carry balances on their cards. With many cards offering promotional interest rates as low as 0 percent, using them to get rid of high-interest cards is a no-brainer move and can help you pay your debt down faster.
Mistakes on your credit history can keep you from getting a loan that you want to buy your next home or car, but they can also have consequences you'd never imagine. Increasingly, insurance companies, apartment rental agents, and even prospective employers order copies of your credit report to see if you're financially responsible. Be sure to take advantage of your free credit check at the government's annualcreditreport.com website to make sure the three big credit-rating agencies have everything right before mistakes come back to bite you.
Payday loans have gotten more tightly regulated recently, but banks and other financial institutions still offer ways to let you get quicker access at your cash -- for a hefty fee. Resorting to short-term money fixes can land you in even more problematic situations down the road, because those solutions often create debt spirals from which it's hard to emerge unscathed. Set up an emergency fund instead and be prepared in advance for the money woes that life throws your way.
Interest rates have risen during the last half of 2013, with a typical 30-year mortgage carrying a 4.5 percent interest rate. But many homeowners still carry higher-interest mortgages from before the financial crisis. Now that home prices have risen, you might be able to refinance for the first time, and many homeowners have used lower rates to cut hundreds from their mortgage payment or shift to a shorter-term 15-year mortgage to pay off their debt faster.
Too many people never update their insurance coverage to deal with changes in their coverage needs, whether it comes from changes in family status for life insurance, health conditions for health-care or long-term care insurance, or even what types of property you own for homeowners' insurance. Don't wait for disaster to strike; check with your insurer or agent to see if your current coverage meets your needs.
In the past, investors had to pay hundreds or even thousands of dollars just to make a simple stock purchase. Now, though, the rise of discount brokers, low-fee index funds and exchange-traded funds, and freely available investment news and advice have made it silly to spend large amounts to get access to the financial markets. If you're still paying your broker too much to invest, look into alternatives that can help you avoid cutting serious money out of your retirement nest egg.
Everyone likes a tax break, and one of the best ones for you to use involves making contributions to a tax-favored retirement account. By putting money in an IRA or 401(k), you can reduce your current taxable income and save on your taxes while also preparing for the future. With 401(k)s, your employer might even chip in a bit on your behalf. Even when times are tough, finding even small amounts to save can put time on your side and make a big difference down the road.
Many investors found out the hard way this year that bonds aren't as safe as they thought, with some major bond funds posting double-digit percentage losses in 2013. Despite those losses, bonds still carry substantial risk in 2014, with many calling for imminent interest-rate hikes that would erode their value further. Even now, bond rates are so low that they don't compensate you much for their risk.
In contrast to bonds, stocks have soared in 2013. That has some investors finally piling into the market for the first time since 2008 and 2009, while others remain shell-shocked from the massive losses they incurred back then during the financial crisis. Even with the Dow Jones Industrials (^DJI) and other major market benchmarks near all-time record highs, it makes sense to have some stock exposure in your portfolio. Just don't go overboard in the false belief that gains of 20 percent and 30 percent will happen every year.
If you pay full price for just about anything these days, you're paying too much. The rise of deep-discount stores has led to falling prices at stores and shopping malls. Moreover, online tools like coupon sites, daily-deal offers, discounted gift cards, and cash-back credit-card deals can cut your costs as well. With all these tools, you won't find many situations in which you have no chance of getting a bargain on the items you want.
In the past, many young adults focused on getting into as strong a college as they could, figuring that their degree would pay them enough to make up for the costs they incurred. With college graduates facing a more challenging job environment than ever, smart students are thinking about college costs before they make a decision on a school. By maximizing financial aid and looking at lower-tuition schools with nearly as strong educational quality, you can avoid creating a big debt hole that you'll struggle with for years into the future.
If you don't have a will, a power of attorney for financial and health-care matters, and an advance directive to tell medical professionals whether you want certain life-preserving measures taken if something happens to you, then you're putting your family at risk. Many people don't have even these basic estate-planning documents, but getting them in place is easier and less expensive than most believe. Get your affairs taken care of in 2014 and save your loved ones some big future hassles.
Resolving to be more financially astute and to avoid common mistakes will help you get your finances in order more quickly. These tips should give you more money to help you meet all your financial goals.
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION
Read Full Story

People are Reading

The Latest from our Partners
1 - 3 of 15