The Federal Reserve may want to raise interest rates, but is reluctant to do that because incoming data are not strong enough to support a boost as the U.S. economy recovers.
That's the crux of a speech Fed Chair Janet Yellen gave in Boston Friday.
Some members of the Fed's Board of Governors fear waiting could be dangerous, according to the minutes of the board's meeting last month as the central bank voted to hold its key interest rate the range of 0.25 to 0.5 percent.
Those members cautioned that acting later would require too strong a boost in the key Federal Funds rate, which would in turn trip up the recovery and cause an economic tumble.
In all, however, Yellen noted that more research is needed to better understand the interactive movements of aggregate demand and aggregate supply, the two primary nationwide actors in analyzing an economy.
Meanwhile, Yellen added, regulators must remember that "an accommodative monetary stance" -- pumping up the money supply -- "if maintained too long, could have costs that exceed the benefits," raising the risk of instability.
And she warned that the benefits and costs of such a strategy "remain hard to quantify, and other policies might be better suited to address damage to the supply side of the economy."
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