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Krugman Op-Ed: Bankers' Higher Interest Rate Demands Are Wrong

Tuesday, February 1, 2011 - 7:17 AM
Bernanke isn't alone in thinking that rates should stay low, and not all bankers want to see rates stay low. In this New York Times op-ed, Paul Krugman argues against demands of the world's top financial executives that central banks raise interest rates.
the Fed was right not to raise rates in 2007-8, when commodity prices soared — briefly pushing headline inflation above 5 percent — only to plunge right back to earth. It’s hard to see why the Fed should behave differently this time, with inflation nowhere near as high as it was during the last commodity boom.

One thing that Krugman didn't address is why the zero interest rate policy has been so ineffective in the last 2 years. Raising interest rates doesn't mean they have to be pushed back to 5%. It could be raising rates back to reasonable low levels like where they bottomed out after the last recession in 2003.
6
Ken TuminKen Tumin5,469 posts since
Nov 29, 2009
Rep Points: 125,077
1. Tuesday, February 1, 2011 - 9:38 AM
A gradual rate increase, in small steps, at this time would be ideal. This would get those that can afford to purchase a home off their couches and down to the mortgage broker. Additionally, a slight rate rise would be a confidence builder for the public in that it would indicate that the economy is improving. 
6
ShorebreakShorebreak2,621 posts since
Apr 6, 2010
Rep Points: 14,210
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