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Stacey Vanek-Smith: Too big to fail. Ever since that term started getting thrown around a couple years ago, short-term interest rates have pretty much been kept at or near zero. Members of the Federal Reserve Board meet in Washington today to discuss whether it’s time to raise them. John Dimsdale has more.
John Dimsdale: At their last meeting six weeks ago, Fed members said the recovery was too fragile to even think about raising interest rates. Since then, companies have reported better profits and even begun hiring workers. Still, Richard Berner at Morgan Stanley says the Fed sees no need to change course yet.
Richard Berner: The key is that monetary policy hinges on the outlook for the economy and inflation, and so when their outlook starts to change to somewhat higher inflation, then I think they’ll think it’s appropriate to remove policies aimed at an emergency situation.
Even a hint of higher interest rates now could squelch the recovery, says Dan Cook of IG Markets.
Dan Cook: Just kind of like if you plant your yard, you don’t mow the grass when it’s a day old and just starting to sprout up. You kind of wait until the roots are established before you make any moves.
Cook figures it will be fall before the Fed starts raising rates to more normal levels.
In Washington, I’m John Dimsdale for Marketplace.
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