Hilsenrath: Fed in No Rush to Raise Rates

Today’s WSJ includes an article by Jon Hilsenrath titled, “Analysis: Fed Likely to Push Back on Market Expectations of Rate Increase.” It was posted just before the stock market’s close at 3:39 p.m. Hilsenrath is the Journal’s ace Fed watcher. He is often chosen by Fed officials to send off-the-record information to the markets. They are clearly concerned that all their recent discordant chatter on when to taper QE is confusing the financial markets and causing bond yields to soar around the world. Hilsenrath was reassuring:

Federal Reserve officials have been trying to convince investors for weeks not to overreact when the central bank starts pulling back on its $85 billion-per-month bond-buying program. An adjustment in the program won’t mean that it will end all at once, officials say, and even more importantly it won’t mean that the Fed is anywhere near raising short-term interest rates.

In case that’s not clear enough, Hilsenrath added:

Since last December the Fed has been promising to keep short-term interest rates near zero until the jobless rate reaches 6.5%, as long as inflation doesn’t take off. Most forecasters don’t see the jobless rate reaching that threshold until mid-2015.

At the same time, however, the Fed is talking about pulling back on its $85 billion-per-month bond-buying program. The chatter about pulling back the bond program has pushed up a wide range of interest rates and appears to have investors second-guessing the Fed’s broader commitment to keeping rates low.

This is exactly what the Fed doesn’t want. Officials see bond buying as added fuel they are providing to a limp economy. Once the economy is strong enough to live without the added fuel, they still expect to keep rates low to ensure the economy keeps moving forward.

Recent articles by Hilsenrath are posted in The Fed Center Press Box