© Reuters/Robert Galbraith - RTR4V7IP
"I see this as more of a warning, a red flag that there's something going on here that isn't in the models, that we maybe don't understand as well as we think, and we should dig down deep deeper and try to figure this out better," he said during a panel discussion at the Brookings Institute in Washington.
Williams, who is a voting member of the Fed's policy-setting panel through the end of the year, has said the central bank should begin to raise interest rates soon but thereafter go at a gradual pace.
He added that the low neutral interest rate had "pretty significant" implications for monetary policy, and put more focus on fiscal policy as a response.
"If we could come up with better fiscal policy, find a way to have the economy grow faster or have a stronger natural rate of interest, then that takes the pressure off of us to try to come up with other ways to do it, like through a large balance sheet or having a higher inflation target. It also means we don't have to turn to quantitative easing and other policies as much."On Wednesday, the Fed held interest rates near zero but signaled that a December rate rise remains firmly in play.
Reader Comments
What do these ivory tower morons at the Fed expect from an economy where the middle class has all its good paying jobs out-sourced to the third world, especially in tech and manufacturing? The middle class is what supports the economy, not the rich, greedy bungholes at the very top. A growing middle class means a growing economy. Just ask India and China.
And correspondingly, a shrinking middle class means recession and economic contraction, even with ultra-low interest rates that only spur debt loading onto the newly poor, the university students, and the ever-receding middle class. Just ask American and the UK workers about their standards of living and purchasing power today versus just 15 years ago. Fudged data never put food into anyone's mouth, or raised anyone out of poverty.
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It's not the model that's the problem, though it was thoroughly rigged to give a rosy result. It's the economy. It's broken. When they went on a bailout binge and started QE, it was just a matter of time before the tear in the continuum appeared.
There's no way out. Greed has all the Money tied up in Scrooge's hands, and it's not going anywhere. The economy is suffering from self-imposed Sanctions.
When one party has all of the Money, there is no such thing as interest growth.
Because interest growth relies on the other party having a productive endeavor to invest in. Which today does not exist in sufficient quantity to support an economy. Notihing to lend money to, nothing to invest in.
Stagnant. Without life. Poisoned Well.
Deflation is disintegration expressed in Dollars.