{"id":546800,"date":"2010-04-29T05:04:00","date_gmt":"2010-04-29T09:04:00","guid":{"rendered":"http:\/\/www.businessinsider.com\/how-long-is-the-feds-extended-period-it-can-be-a-lot-longer-than-you-expect-2010-4"},"modified":"2010-04-29T05:04:00","modified_gmt":"2010-04-29T09:04:00","slug":"how-long-is-the-feds-extended-period-it-can-be-a-lot-longer-than-you-expect","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/546800","title":{"rendered":"How Long Is The Fed’s “Extended Period”? It Can Be A Lot Longer Than You Expect"},"content":{"rendered":"

Catherine Rampell at the NY Times Economix asks: How Long Is an ‘Extended Period’?<\/a><\/p>\n

Short answer: Longer than many analysts expect.<\/p>\n

First we can compare to the “considerable period” language in 2003:<\/p>\n

\n
  • June 25, 2003: Lowered Rate to 1%, Unemployment Rate peaked at 6.3%\n<\/li>\n
  • August 12, 2003: “the Committee believes that policy accommodation can be maintained for a considerable period.” Unemployment rate at 6.1%\n<\/li>\n
  • December 9, 2003: Last statement using the phrase “considerable period”. Unemployment rate at 5.7%\n<\/li>\n
  • January 28, 2004: the Committee believes that it can be patient in removing its policy accommodation. Unemployment Rate 5.7%\n<\/li>\n
  • May 4, 2004: “the Committee believes that policy accommodation can be removed at a pace that is likely to be measured.” Unemployment Rate 5.6%\n<\/li>\n
  • June 30, 2004: FOMC raised the Fed Funds rate 25 bps. Unemployment Rate 5.6%<\/li>\n<\/blockquote>\n

    So “extended period” is probably 6+ months after the language changes – the next meeting is June 23rd and 24th, so the earliest rate hike would probably be in December (barring a significant pickup in inflation or rapid decline in unemployment).<\/p>\n

    \"chart\"<\/a>Click on graph for larger image in new window.<\/span><\/strong><\/em><\/p>\n

    This graph shows the effective Fed Funds rate (Source: Federal Reserve<\/a>) and the unemployment rate (source: BLS<\/a>)<\/p>\n

    In the early ’90s, the Fed waited more than a 1 1\/2 years after the unemployment rate peaked before raising rates. The unemployment rate had fallen from 7.8% to 6.6% before the Fed raised rates.<\/p>\n

    Following the peak unemployment rate in 2003 of 6.3%, the Fed waited a year to raise rates. The unemployment rate had fallen to 5.6% in June 2004 before the Fed raised rates.<\/p>\n

    Although there are other considerations, if we assume the unemployment rate peaked in October 2009 – and add 18 months – then the Fed would probably wait until early 2011 to raise rates (at the earliest). My guess is the Fed will probably wait until the unemployment rate is closer to 9% before removing the “extended period” language, and it is unlikely they will raise rates until the unemployment rate is below 8%. Last September I wrote: Fed Funds and Unemployment Rate<\/a>. Here is an excerpt with an updated graph:<\/p>\n

    Join the conversation about this story »<\/a><\/p>\n

    <\/p>\n","protected":false},"excerpt":{"rendered":"

    Catherine Rampell at the NY Times Economix asks: How Long Is an ‘Extended Period’? Short answer: Longer than many analysts expect. First we can compare to the “considerable period” language in 2003: June 25, 2003: Lowered Rate to 1%, Unemployment Rate peaked at 6.3% August 12, 2003: “the Committee believes that policy accommodation can be […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-546800","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/546800","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=546800"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/546800\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=546800"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=546800"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=546800"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}