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Mark Gilbert

Half a Century of Evidence to Fear the Fed

On one historical measure of how much slack there is in the economy, the Federal Reserve should already be reaching for its rate-rise button.
They're filming a slasher flick.
They're filming a slasher flick.

The hottest game in financial markets is trying to guess when the Federal Reserve willfinally raise its benchmark interest rate. Fed officials have said that their main concern is over how much slack, or spare capacity, exists in the economy, because workers will become emboldened to ask for higher wages -- and employers will come under pressure to provide them -- only when the slack diminishes. On one measure, the Fed should already be reaching for the rate-rise button.

The Fed funds rate has been held at 0.25 percent since the end of 2008. This week, the central bank repeated its commitment to keep borrowing costs low for a "considerable time." At the same time, it changed its language aboutthe jobs market, saying the "underutilization of labor resources is gradually diminishing." It had previously referred to a "significant underutilization."