Fed Presidents Provide Plenty of Cover to Maintain Zero Interest Rate Policy

Fed Presidents, who by the way have been creating an excessive amount of "dead presidents" (vernacular substitute for dollars) lately, still remain cautious on the economic recovery and more or less admit that the challenges of high unemployment, dependency of financial institutions on government stimulus life support, and weakness in commercial real estate have yet to be overcome.

Gleaned from Reuters news at Yahoo Finance is the following excerpt attributed to San Francisco Fed President, Janet Yellen:

"High unemployment, weak job growth and paltry wage increases are a recipe for sluggish consumer spending growth and a tepid recovery," said Yellen.

The Fed chopped overnight interest rates to near zero in December and it has pumped more than $1 trillion into the economy to spur a recovery from the deepest downturn since the Great Depression.

Last week, it reaffirmed its commitment to keep borrowing costs ultra-low for "an extended period," and financial markets will be listening to Fed officials closely to try to gauge when they may finally move to withdraw their economic support..

While comments from her Atlanta counterpart, Dennis Lockhart, cover the following:

Lockhart, speaking at a Urban Land Institute conference in Atlanta, Georgia, said he believed the economic recovery was under way but added he expects the pace of growth to be "relatively subdued" in the medium term.

"The situation is much improved, but there are sobering aspects of the economic picture," Lockhart said, noting that the economy has been supported by temporary government programs and that data on bank failures, foreclosures, unemployment and personal income "continue to disappoint."

I believe that comments from both of these Fed presidents accurately assess the current economic environment and give the Fed plenty of cover to maintain ZIRP (zero interest rate policy).

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