A top Federal Reserve official who has often warned of the risks of keeping U.S. interest rates too low for too long said on Friday she wants to see how winding down the Fed's massive bond-buying stimulus goes before setting out any path for rate hikes.
"I don't think it would be fair to say I have a date in mind or a path in mind," for the appropriate timing of the Fed's first rate increase, Kansas City Federal Reserve Bank President Esther George told the Central Exchange, a group of women professionals. "We are in a place now where we have to be very careful and think about how we are beginning to withdraw stimulus."
George's reticence on her preferred path for rate hikes sets her apart from her peers, who in recent days have shown an increased willingness to voice their views. St. Louis Fed President James Bullard, for instance, said he would want to see rate hikes begin in early 2015; Chicago Fed President Charles Evans suggested he was gunning for early 2016.
Indeed Fed Chair Janet Yellen started the ball rolling last week, when she suggested there could be around a six-month gap between the end of the Fed's bond-buying program and the start of ratae hikes.
But with the Fed on track to keep buying bonds until the fourth quarter, George told reporters, it is too early to set any schedule for raising rates.
"I don't think you can do that. I don't know what will happen in six months. We don't control the whole path," George told reporters. "We are making a decision on asset purchases right now. Depending on how that goes will determine the lift off in rates."
The Fed has kept rates near zero since December 2008, and more than quadrupled its balance sheet to over $4 trillion with an asset-purchase program aimed at spurring borrowing, spending and hiring.
Many Fed officials believe those policies have helped bring the unemployment rate down from a recession high of 10 percent to its current level of 6.7 percent.
In December the Fed took a first step toward unwinding its super-easy policies, paring its bond-buying program and signaling it would end it altogether later this year.
George is not usually one to hold back on her views. When it was her turn to vote on the Fed's policy-setting panel, she used every one of her votes to dissent from the Fed's policy easing, voting with the majority only in December when the Fed began paring its bond purchases.
On Friday she said she continues to support the Fed's reductions in bond-buying, and she also supports the decision to base any raise rates on a "wide range" of factors rather than use a specific unemployment rate benchmark.
But she also made clear that she differs from the majority of her Fed colleagues in wanting to keep rates near zero for a "considerable time" after bond-buying ends, and below normal even once employment and inflation reach healthier levels.
"The risk I see is being too low for too long," she said.
George said she believes the economy is growing steadily and the job market is "moving in the right direction."
She expects U.S. GDP to grow around 2.5 percent this year and closer to 3 percent after that, fast enough to continue to bring down the unemployment rate.
Companies, she said, are already finding it harder to hire qualified workers, and upward pressure on wages should help bring inflation back up toward's the Fed's 2-percent target. (Reporting by Carey Gillam; Writing by Ann Saphir; Editing by Chizu Nomiyama)