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That suggests that they are open to further interest rate cuts and may keep rates lower for longer than expected.
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A study by economists at the Federal Reserve, published this week, has fuelled speculation that it may keep interest rates at rock bottom even longer by lowering the level of unemployment at which it will consider rate increases from the current 6.5% (see Free Exchange).By contrast, the euro area looks increasingly vulnerable to a slide into deflation.
By the same token, bad financial weather may keep interest rates low around the globe.
If the economy slows, the Fed may keep cutting rates, pushing down the dollar, and the cycle repeats.
Under such circumstances, the Federal Reserve, fearing that a falling dollar will provoke higher inflation even as the economy is slowing, may keep interest rates higher than it otherwise would in order to attract dollar buyers.
They may also conflict with monetary policy; it may keep interest rates low to prevent a firm from failing, though that could risk stoking higher inflation.On the other hand, as the lender of last resort only the Fed can inject money into virtually any type of firm; it might be good to give it corresponding authority to prevent abuse, too.
Indeed, if Europe's woes infect America and Britain, their central banks may yet decide to keep rates where they are.
The commitment to keep rates low may be intended to amplify the effect of the current low rate by reassuring investors that they can count on easy money for the foreseeable future.
But such a sweeping pledge may not be believed.Promising to keep rates low until unemployment reaches a certain threshold as the Fed is currently might be more credible, in that it sets a clear limit on the central bank's new-found permissiveness.
That will keep rates down.
That buying helps keep rates down.
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