Tuesday, December 15, 2009
Long time to wait?
But leaving rates at such levels is not without significant risks. Low rates can sow the seeds of inflation, which can eat into workers' earnings and squeeze budgets. It also has been blamed for the fall in the value of the dollar versus other major currencies, such as the euro, which in itself can limit Americans' buying power. Beyond that there are concerns that cheap rates can feed asset bubbles. Many blame the Fed's decision to leave rates at its previous record low of 1% for 12 months from June 2003 to June 2004 as a major factor in feeding the housing bubble.