Monday, June 14, 2010 - 4:39 PM
"Many predict that the economy will take years to return to full employment and that inflation will remain very low," Rudebusch wrote. "If so, it seems likely that the Fed's exit from the current accommodative stance of monetary policy will take a significant period of time."
"Yet Rudebusch argues that the large sums have few implications for inflation for as long as banks are reluctant to lend and demand for credit is scant."
"The doubling of the Fed's balance sheet has had no discernible effect on long-run inflation expectations," he said.
"Given predictions for the jobless rate to come down only slowly and inflation to remain low, there is "little need to raise the (federal) funds rate target above its zero lower bound any time soon," Rudebusch says.
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