Fed Funds Rate to Stay Low for Long Time: Kubarych

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July 10 (Bloomberg) -- Craig Drill Capital's Roger Kubarych comments on how Federal Reserve monetary policy is impacting financial markets. He speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

The federal reserve act in new york.

Welcome.

I'm glad to see you.

There were divisions among said members about when to slow the bond purchases and when to end them all together.

Do they threaten to muddy the fed smash it -- message?

We had a terrible recession, particularly centered in housing.

To get housing moving again is taking time.

Now it is happening.

Part of the reason is because long-term interest rates came down a lot and mortgage availability and cost improved for the homebuyer.

Now, we have the seeds of the very vigorous recovery in the area and quantitative easing contributed.

Now that you have housing on stronger footing and car sales at terry high levels, you still need that and committee members are split and there is no doubt about it.

The biggest split i have seen, detailed in the minutes since probably the mid 80's. jobs reports, august second, september 6, they are key.

What type of sustained momentum to policy makers need to see to a cut monthly bond purchases beginning in september?

I would think you cannot know he what the threshold number four payroll employment gains, but if it starts getting north of 200,000 month, and if it is full-time jobs, not simply moving people into part- time jobs, which happened in the most recent in june numbers, then i think it would speed up their move away from quantitative easing.

They will not move away from low federal funds rates for a long time.

There, they have a threshold of 6.5%. even then, they might in a fit from the very low inflation rate to continue to have a low federal funds rate at zero for a year, a year and a half, and two years.

Is inflation being discussed enough?

Does that concern you?

Lacks i am not concerned by low inflation because wage growth is low.

If wage growth were much higher, there would be a question raised about sustainability of these low rates.

The real rate is negative and that is a stimulative factor.

Circling back to unemployment in a second, when the latest round of easing was announced, unemployment rate was 8.1% and now it is 7.6%. how much more improvement does the economy have to show before the fed begins to move it?

Is 6.5%, is that threshold written in stone?

I do not think it is.

It is not written in invisible ink.

We all know about it.

If you still had a one percent inflation rate, a year and a half from now, and you raised 6.5% to 6.4 or 6.3%, it would not necessarily force them to move.

If you had 6.5% and the inflation rate went up to two and a half, you would have it earlier than that.

The inflation situation is favorable for the fed to have room to maneuver.

You mentioned interest rate.

Bond -- bond purchases helped keep interest rates low.

Are you concerned ones that the ends, there might be volatile reactions in the markets because of it?

We had it -- reaction to be sure the committee was becoming more split.

That was coming through clearly in the discussion after the meeting and the chairman's press conference.

That really stunned a lot of people.

When ec the minutes,, you see there is a real split.

It could happen sooner.

My guess is the economy is moving in a direction of two percent and the private sector is growing much greater than that.

1.5% is being subtracted by the government sequester.

A two percent economy does not force them to move for the end of the year.

Mr.

bernanke spoke in massachusetts today and said the fed had to reinsert it mission of preserving financial stability during the recent financial crisis and he said the maintenance of financial stability is coequal with the fed's responsibility of management to the monetary policy.

What is your reaction?

If you look at the lineup on the federal board and they presidents, you do not get the impression financial stability is being given the same amount of attention in terms of hiring.

In terms of the staffing of top officials.

They would need to move in that direction.

Roger is an international

This text has been automatically generated. It may not be 100% accurate.

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