The Federal Reserve issued a statement on Tuesday pledging it would hold short-term interest rates near zero through the first half of 2013. Boston University School of Law professor Cornelius Hurley is director of Boston University’s Center for Finance, Law & Policy and a former counsel to the Fed Board of Governors. He offers his view on the impact of the FOMC’s low-rate declaration.
“Does anyone seriously think that, if by some miracle the economy began to grow again, the Fed would not raise rates to stem inflation?
“The FOMC gave the credulous equity markets what they wanted to hear, but at what cost? The credibility of the Fed? So asked the three dissenting Federal Reserve Bank presidents.
“Perhaps it would have been better and more transparent for the Fed to have described the ‘policy tools’ it has in its closet.”