Official: Fed Won't Consider Rate Rise Until October

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Fed Won't Consider Rate Rise Until October
Jim Stem/Bloomberg via Getty Images Federal Reserve Bank of Dallas President Richard Fisher
By Ann Saphir

DALLAS -- The Federal Reserve will likely bring its massive bond-buying program to an end in October, and only after that will it consider when to raise U.S. interest rates, a top Fed official said Sunday.

"I personally expect us to end that program in October," Dallas Federal Reserve Bank President Richard Fisher said in an interview on Fox News. "Then we have to see how the economy is doing, including these broader measures of unemployment and where we stand before we can talk about how we might move the short-term rate."

U.S. unemployment registered 6.3 percent in April, a government report showed Friday. But broader measures of the strength of the labor market, including the labor participation rate and hourly wages, indicated the job market is still far from strong.

More workers are dropping out of the labor force, data showed, suggesting that many saw job prospects too poor to merit a job hunt. Average hourly wages last month didn't grow at all.

%VIRTUAL-article-sponsoredlinks%"It's too early to tell," Fisher said of when the economy will be ready for higher rates. "I'll make this prediction: some time in the next 100 years, interest rates will go up."

The Fed has kept short-term U.S. interest rates near zero since December 2008 and has bought trillions of dollars in long-term securities to help boost the economy and bring down unemployment.

Five months ago, with unemployment down sharply from its recession-era high around 10 percent, the Fed began cutting back on its monthly bond-buying stimulus.

Last week it continued that process, trimming its monthly purchases to $45 billion.

At the same time, the Fed has said it will keep rates near zero for a "considerable time" after it ends its bond-buying program so that it can assess the strength of the economy.

Fisher, who votes on Fed policy this year, has long wanted to end the bond-buying program and has warned that keeping rates too low for too long could feed unseen financial market bubbles.

9 Numbers That'll Tell You How the Economy's Really Doing
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Official: Fed Won't Consider Rate Rise Until October
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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