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In the Media
| April 2013
Raskin Says Record Fed Easing to Aid Low-Income Americans
By Jeff Kearns
Bloomberg, April 18, 2013. All Rights Reserved.
Federal Reserve Governor Sarah Bloom Raskin said the Fed should press on with record easing, predicting that current policy will increasingly improve the economic outlook for low-income Americans.
The Fed’s near-zero interest rate policy and asset purchases are growing more effective by supporting the housing market and spurring economic activity, Raskin said today in a speech at a Ford Foundation conference in New York.
“Accommodative monetary policy could be increasingly potent” as the housing market recovers, Raskin said. “As house prices rise, more and more households have enough home equity to gain renewed access to mortgage credit and the ability to refinance their homes at lower rates.”
The Federal Open Market Committee in March agreed to continue buying $85 billion in Treasuries and mortgage bonds per month in an effort to bolster growth and reduce unemployment that was at 7.6 percent last month. Fed officials are debating how to eventually curtail asset purchases that have swollen the central bank’s balance sheet to a record $3.3 trillion.
“The accommodative policies of the FOMC and the concerted effort we have made to ease conditions in the mortgage markets will help the economy continue to gain traction,” Raskin said. “And the resulting expansion in employment will likely improve income levels at the bottom of the distribution.”
Financial Shocks
At the December 2007 start of the 18-month recession, there were an “unusually large” number of low- and middle-income households that were vulnerable to financial shocks after 30 years of “sluggish” wage growth, Raskin said.
“Their exposure to house prices had increased dramatically,” and they were more likely to be affected by lost jobs and reduced savings, Raskin said. That deepened the recession and prolonged the recovery, she said today at the foundation’s 22nd Annual Hyman P. Minsky Conference.
U.S. growth slumped to 0.4 percent in the fourth quarter, the slowest since the first quarter of 2011, amid government budget cuts and military spending that plunged the most since the waning days of the Vietnam War four decades ago.
Economists expect growth to rebound. Gross domestic product probably grew at a 3 percent annualized rate from January through March, according to the median forecast in an April 5-9 Bloomberg survey of 69 economists. That’s up from the 2 percent gain projected by economists last month.
The Standard & Poor’s 500 Index slumped for a second day, dropping 0.7 percent to a six-week low of 1,541.61 as earnings from UnitedHealth Group Inc. to EBay Inc. disappointed investors. The yield on the benchmark 10-year Treasury note decreased 0.01 percentage point to 1.68 percent.
Raskin, 52, was appointed by President Barack Obama in 2010 for a term that expires in 2016. Before joining the Fed she was Maryland’s Commissioner of Financial Regulation, according to the Fed Board website.
Federal Reserve Governor Sarah Bloom Raskin said the Fed should press on with record easing, predicting that current policy will increasingly improve the economic outlook for low-income Americans.
The Fed’s near-zero interest rate policy and asset purchases are growing more effective by supporting the housing market and spurring economic activity, Raskin said today in a speech at a Ford Foundation conference in New York.
“Accommodative monetary policy could be increasingly potent” as the housing market recovers, Raskin said. “As house prices rise, more and more households have enough home equity to gain renewed access to mortgage credit and the ability to refinance their homes at lower rates.”
The Federal Open Market Committee in March agreed to continue buying $85 billion in Treasuries and mortgage bonds per month in an effort to bolster growth and reduce unemployment that was at 7.6 percent last month. Fed officials are debating how to eventually curtail asset purchases that have swollen the central bank’s balance sheet to a record $3.3 trillion.
“The accommodative policies of the FOMC and the concerted effort we have made to ease conditions in the mortgage markets will help the economy continue to gain traction,” Raskin said. “And the resulting expansion in employment will likely improve income levels at the bottom of the distribution.”
Financial Shocks
At the December 2007 start of the 18-month recession, there were an “unusually large” number of low- and middle-income households that were vulnerable to financial shocks after 30 years of “sluggish” wage growth, Raskin said.
“Their exposure to house prices had increased dramatically,” and they were more likely to be affected by lost jobs and reduced savings, Raskin said. That deepened the recession and prolonged the recovery, she said today at the foundation’s 22nd Annual Hyman P. Minsky Conference.
U.S. growth slumped to 0.4 percent in the fourth quarter, the slowest since the first quarter of 2011, amid government budget cuts and military spending that plunged the most since the waning days of the Vietnam War four decades ago.
Economists expect growth to rebound. Gross domestic product probably grew at a 3 percent annualized rate from January through March, according to the median forecast in an April 5-9 Bloomberg survey of 69 economists. That’s up from the 2 percent gain projected by economists last month.
The Standard & Poor’s 500 Index slumped for a second day, dropping 0.7 percent to a six-week low of 1,541.61 as earnings from UnitedHealth Group Inc. to EBay Inc. disappointed investors. The yield on the benchmark 10-year Treasury note decreased 0.01 percentage point to 1.68 percent.
Raskin, 52, was appointed by President Barack Obama in 2010 for a term that expires in 2016. Before joining the Fed she was Maryland’s Commissioner of Financial Regulation, according to the Fed Board website.
Associated Program:
Publication Highlight
A Great Leap Forward
Heterodox Economic Policy for the 21st Century
Author(s): L. Randall WrayJanuary 2020
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