Fed considers time to end free money pledge

FE Team | Published: December 15, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

A man wears US dollar sign rings in a jewelry shop in Manhattan in New York City recently. — Reuters Photo

BRUSSELS, Dec 14 (Reuters) : The US Federal Reserve would give the clearest signal next week that its easy money stance is ending if, as some expect, it drops its two-year long pledge to keep interest rates close to zero for a "considerable time".
The Fed, which meets on Tuesday and Wednesday, first inserted that wording in its post-meeting statements in December 2012, promising then to maintain its highly accommodative monetary stance for a considerable time after its asset purchase program ends and the economic recovery strengthens.
The US unemployment rate slipped below 6.5 per cent, a Fed mark of healthier recovery, in April and is now at a six-year low of 5.8 per cent even as more people enter the labor force. Its asset buying ended in October, when all but one of its voting members opted to keep the "considerable time" language.
The market has understood the term to mean at least six months, with current expectations for a first rate hike in mid-2015.
Since October, the more hawkish Dallas Fed chief Richard Fisher has said the Fed should drop the pledge, while more moderate Cleveland counterpart Loretta Mester told Reuters the reference was "really stale".