Fed to raise interest rates by Zuzana Zelenakova

As the financial system is getting better the Federal Reserve is making plans to raise interest rates. It has raised the discount rate recently, which is an interest rate the central bank charges other banks for borrowing reserves. Although it has come earlier than many expected, it is a good sign signaling the advancing recovery. The Fed has held interest rates at record low levels since December 2008, but now the Fed Chairman Ben Bernanke and his colleagues have to figure out the best way as to how and when send the signal so that borrowers and investors won´t be confused or agitated. The Fed has promised to keep interest rates untouched for an “extended perio! d”, and now they have to weigh whether to change the pledge or stick with it. "During the Depression, the Fed tightened policy too soon and cut off the recovery before it was self-sufficient," said Joel Naroff, president of Naroff Economic Advisors. "The Fed doesn't want to make that mistake again. I think that they are willing to stay with very easy money longer than they might normally because of all the damage that has been done to the economy." Most probably, the change until the next Fed´s meeting scheduled for April 27-28. Although the recovery is in progress it is a slow process we are talking about. Unemployment rate, which is currently at 9.7 percent, is likely to stay that way and the companies are still not hiring very eagerly. "Cautiously optimistic is where the Fed is right now," said William Cheney, chief economist at John Hancock. "But it is heavy on the caution and light on the optimism." According to the experts, interest rates are most likely t! o jump this fall. Economists and investors are wondering if th! e Fed mo difies also the program that has lowered mortgage rates and boosted the housing market.

related story (sgx16763): http://news.yahoo.com/s/ap/20100316/ap_on_bi_ge/us_fed_inter...

by Zuzana Zelenakova for Cantell TV (http://cantell.tv)

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