Federal Reserve Bank of San Francisco President Janet Yellen said the U.S. economy will operate below potential this year and next and still needs low interest rates to gain strength.
“When the day comes to start raising rates again, we have tools at the ready,” Yellen said in the text of a speech today in San Diego. “For the time being, the economy still needs the support of extraordinarily low rates.”
Policy makers are withdrawing the unprecedented programs that helped halt the deepest financial crisis since the Great Depression. The Fed last week raised the discount rate charged to banks for direct loans, while also citing its pledge to keep its benchmark federal funds rate low for an “extended period.”
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Enough of the silly slogan that “government isn’t the solution, government is the problem.” Government, in fact, is the solution to a national economic calamity not seen since the 1930s.
Since rolling out his anti-Great Depression policies in 2002, Ben Bernanke has had the dubious distinction of being the major contributor to the worst financial and economic crisis to hit in the post-World War II era. His theory and practice was to fight an enemy that did not exist in 2002 – deflation. As a result, he ended a long period of economic prosperity.
The changes in the economy over the past 18 months have had profound effects on the lives of people across the country. Now, for the first time, a new PARADE survey shows just how dramatically Americans’ goals, hopes, spending habits, relationships, and even their attitudes toward trusted institutions have been transformed by the recession.