With all the talk by Fed Chairwoman Janet Yellen and other Fed officials that interest rates will be raised by the end of the year, Federal Reserve Vice Chairman Stanley Fischer seems to be taking a different approach, believing that there is a risk to raising interest rates prematurely.
Speaking in Israel, Fischer said that while markets largely expect the first rate hike in September, it will be determined by data and not by date and that it was "misleading to give so much importance to the Fed's first interest rate hike since the process of returning to a more normal level will take a few years.”
In a speech at IDC Herzliya in Herzliya, Israel, he said "If the (U.S.) economy is growing very, very slowly we will wait. If the economy is growing faster we will do it quicker."
"What we are thinking about is raising the interest rate from zero, which is an ultra-expansionary monetary policy to a quarter percent, which is an extremely expansionary monetary policy. This will be a gradual process," he continued.
U.S. Economy Strengthening
The U.S. economy seems to be emerging from a shaky first quarter. Payrolls were up by 223,000 in April after a March slump while the unemployment rate fell to 5.4 percent, the lowest in almost seven years.
Fischer added that the Federal Reserve board expects the interest rate will reach 3.25 to 4 percent by 2017-2018.