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Chairman Ben Bernanke and the rest of Federal Reserve board is unlikely to raise interest rates in the near future. - 

Jeremy Hobson: We'll start in Washington, where the nation's central bankers are getting ready for a meeting at the Fed. And at the end of it, they'll release a short statement as they always do. But this time could be a little different. Some economists who watch the Fed think the central bank is about to signal an earlier end to its free money policy. The theory is that with an improving domestic economy, the Fed doesn't need to keep its key interest rate at zero percent much longer.

For more on this, let's bring in former Fed economist Gary Shilling, who joins us from Springfield, N.J. Good morning.

Gary Shilling: Good morning.

Hobson: Do you think that we're at a turning point here, that the Fed may decide to end its zero interest rate policy -- not right away, but at least, they'll say they're going to do it sooner than we thought?

Shilling: I'm not sure they're going to do anything right now with the crisis in Europe, they may be reluctant to make any change. But the one thing they are shifting toward is what I would call "phase 3" of monetary policy.

They first reduced interest rates; that didn't really bring the economy back to honey and roses. Then they went in for this quantitative easing -- buying a lot of Treasury securities and mortgage-related securities. That really didn't do the job. And the third phase I think I'd call "jawboning." I think they're out of bullets. Right now, they're concentrating on communications, if you will.

Hobson: Explain the choice that they face. What is the effect going to be when they finally do decide to raise interest rates?

Shilling: Well, it wouldn't have much effect in itself, because it probably would be following a much stronger economy -- in other words, it would be more the effect than a cause. I don't see the Fed doing that in a vacuum, not in an economy -- and particularly in a global economy -- as weak as it is today.

Hobson: I want to just finally take you back to a few years ago when they did put in this zero interest rate policy. Did you ever think that three years later, we'd still be in the same place?

Shilling: It took three decades to leverage up, to in effect go through tremendous excess borrowing by U.S. consumers, by the financial sector globally. And it takes a long time to unwind that -- and that's the good news. If it were unwound in a year or so, we'd have a depression that would make the 1930s look like a Sunday school picnic.

Hobson: Former Fed economist Gary Shilling, joining us from Springfield, N.J. Thanks so much.

Shilling: You're most welcome.

Follow Jeremy Hobson at @jeremyhobson