Federal Government Policy and Business

Lesson for Fed: Higher Interest Rates Haven’t Been Sticking

The Wall Street Journal (online registration required): In the seven years since the world’s central banks responded to the financial crisis by slashing interest rates, more than a dozen in advanced economies have subsequently tried to move rates back up. Not a single one—in the eurozone, Sweden, Israel, Canada, South Korea, Australia, Chile and beyond—has been able to sustain interest rates at the higher level it sought.

That points to a risk for the U.S. Federal Reserve as officials contemplate raising short-term interest rates for the first time in nearly a decade. Whether or not they move at their meeting this week, as they have suggested they could, they expect slow but steady increases in the next three years. If their judgment is right, the economy will keep growing, unemployment will stabilize at a low level and inflation will slowly move higher as they proceed.

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