Fed’s Dudley: Ultra-low interest rates justified

NEW YORK, May 21 (BestGrowthStock) – The U.S. economic recovery is
likely to be more sluggish than the Federal Reserve would like,
justifying the central bank’s easy money policy, New York Fed
President William Dudley said on Friday.

Dudley told students at the New College of Florida in
Sarasota that U.S. households are still in the process of
deleveraging, the banking system is still under “significant
stress” and the support from fiscal stimulus is fading,
according to prepared remarks.

“Coupled with the benign outlook for inflation, these
headwinds to growth and employment explain why the Federal
Reserve is keeping short-term interest rates unusually low,”
Dudley said in a commencement address.

The situation is improving, he said, but “we are still far
from where we want to be.”

The U.S. central bank cut the target for its benchmark
interest rate to near zero percent in December 2008 and has
rates there since then to aid economic and financial market
recovery from a severe recession. At the Fed’s last meeting, it
reiterated its pledge to keep rates extraordinarily low for an
extended period.

The stress in the banking system means banks have been slow
to ease credit standards even as the economy improves, Dudley
said.

He offered some advice to graduating students facing a weak
job market.

“In this environment, finding a job will be tough, but when
you hit the pavement remember the job market is improving.
Don’t get discouraged,” he said.

“My first bit of advice is: don’t rush,” he said. “Take the
time to find what really interests you. … If you like what
you are doing, you almost certainly will be successful at it.”

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Fed’s Dudley: Ultra-low interest rates justified