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Fed's Yellen: rates could be near zero for years

Published 06/30/2009, 11:12 PM
Updated 06/30/2009, 11:16 PM

SAN FRANCISCO, June 30 (Reuters) - U.S. benchmark lending rates could stay near zero for a couple of years based on the amount of slack now in the economy, San Francisco Federal Reserve Bank President Janet Yellen said on Tuesday.

"My staff has looked at 12 different ways to calculate the output gap," and every one points to a large gap between current and potential output, Yellen told reporters after a speech in San Francisco.

Bets in futures markets on a rate increase as soon as late 2009 are "jumping the gun", she said.

The jobless rate is likely to continue climbing this year, and the moment the recession ends is "not the right time to take away the punchbowl", said Yellen.

She added that views circulating that the Fed risks triggering some kind of hyper-inflation by not rushing to raise interest rates are "misplaced".

Yellen is a voting member of the Federal Open Market Committee in 2009. (Reporting by Ros Krasny; Editing by Jan Dahinten)

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