Fed’s Dudley Says Rates May Stay Low for as Long as Two Years

By Joshua Zumbrun

Jan. 14 (Bloomberg) -- New York Federal Reserve Bank President William Dudley said short-term interest rates may remain low for at least six months and possibly for as long as two years.

“Short-term rates are going to stay low for a considerable period of time to come,” Dudley said yesterday, according to the transcript of an interview with PBS Television’s Nightly Business Report.

The policy of keeping borrowing costs low could remain in place “at least six months,” Dudley said. “It could be a year from now, two years from now. It’s going to depend on how the economy develops.”

The Fed has held the benchmark rate for overnight loans between banks close to zero for more than a year to pull the economy from the worst recession since World War II and reduce joblessness that’s almost at a 26-year high. Policy makers on Dec. 16 affirmed a pledge to maintain the policy for an “extended period.”

Before supporting an interest rate-increase, “I certainly need to see an economy that’s vigorous enough to bring the unemployment rate down, number one,” Dudley said. “And two, I would care about what’s going on in inflation.”

“We’re doing very well on the inflation side,” he said. “We’re doing not well at all on the employment side.”

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Unless otherwise indicated, these APR calculations are based on the following: Conforming loans (whose maximum loan amount is below $417,000 for the contiguous states, District of Columbia, and Puerto Rico or below $625,500 for Alaska, Guam, Hawaii and the Virgin Islands) are calculated based on a loan amount of $417,000 with closing costs of $9,370. Jumbo Loans (whose maximum loan amount exceed $417,000 for the contiguous states, District of Columbia, and Puerto Rico or exceed $625,500 for Alaska, Guam, Hawaii and the Virgin Islands) are calculated based on a loan amount of $1,000,000 with closing costs of $21,030. Your actual APR may be different depending upon these factors.