He advised it the first time in November of 2002. And he mentioned it, if anyone had forgotten, in the symposium held at Jackson Hole in August of 2010. On both occasions, Ben Bernanke affirmed that one of the tools for avoiding deflation is to set interest rates at a flat level for a long period of time. Well, yesterday the United States Federal Reserve put words into action.
The Fed guaranteed that interest rates are goign to remain between 0% and 0.25%, their level from December of 2008 until the middle of 2013. Or in other words, it is providing free money to the most powerful economic players for another year.
This measure is without precedent and in response to a crisis never known before, becuase the Fed resorted to this alternative after remembering that economic growth in 2011 has been considerably lower than what it had hoped. The decision to announce that interest rates will remain the same until 2013 generated strong disagreement within the heart of the Fed. Three of its ten members Richard Fisher, Narayana Kocherlakota and Charles Plosser voted against the decision to keep rates where they are.
Dissent within the Federal Open Market Committtee, the policymaking arm of the Federal Reserve, added more uncertainty to already-existing doubts, giving a signal that Bernanke?s team is divided and is anticipating additional problems in how to manage the US economy in the future. Opposition like this has not been seen since 1992.
