The Federal Reserve risks repeating “sins of the past” if it doesn’t raise key interest rates, says a University of Central Florida economist.
“The Fed kept interest rates too low, too long in the wake of the 2001 recession, and that’s what led to the asset bubble that ultimately made this recession as bad and as deep as it was,” says Sean Snaith, director of the UCF College of Business Administration’s Institute for Economic Competitiveness.
Snaith predicts the end of “excessively loose monetary policy” in his national forecast released this morning.
After this week’s report from the Fed about continued economic growth, the central bank will start raising interest rates by the summer. If not, it risks that the economy will “overheat,” leading to inflation, Snaith says.
Plus, he adds ahead of Friday’s report on U.S. unemployment, “leaving interest rates too low for too long isn’t the cure for joblessness.”
Snaith is available to speak with reporters today, and he will be attending the National Association for Business Economics (NABE) Economic Policy Conference March 7 to 9 in Washington, D.C.
Snaith’s full U.S. forecast is available on his newly redesigned Web site.
Highlights of his report include:
— The probability that we will fall back into a recession remains low throughout 2010, making the likelihood of a double-dip recession fairly remote.
— Job creation will be muted during the rest of 2010. Hiring related to the 2010 Census will create a surge in temporary jobs, but most will go away by the end of September.
— The American public’s “bailout fatigue” has turned into voter anger, which could cause many incumbents to lose in the mid-term elections.
— Pent-up demand and the “cash for clunkers” rebate attracted many people to car lots during the third quarter of 2009. The temporary boost to the automotive sector is over, and sales have fallen back. It will be 2013 before light vehicles reach pre-recession levels of more than 16 million in annual sales.
Snaith is a national expert in economics, forecasting, market sizing and economic analysis who authors quarterly reports about the state of the economy. Bloomberg News recently named Snaith as one of the country’s most accurate forecasters for his predictions about the Federal Reserve’s benchmark interest rate, the Federal Funds rate.
Snaith is also a member of several national forecasting panels, including The Wall Street Journal Economic Forecasting Survey, the Western Blue Chip Economic Forecast panel, the National Association of Business Economics Quarterly Outlook Survey Panel, the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters, Bloomberg U.S. Economic Indicator Survey and USA Today Economic Survey Panel. Blue Chip named him the most accurate forecaster for California in 2007.
The Institute for Economic Competitiveness’ mission is to expand public understanding of the economy by convening business leaders, scholars, policy makers, civic groups and media to discuss critical issues.
Original article written by Christine Dellert, UCF News & Information.