"Bernanke Must Raise Benchmark 2 Points in Latest Rajan Warning" writes Bloomberg. It says, "Raghuram Rajan accurately warned central bankers in 2005 of a potential financial crisis if banks lost confidence in each other. Now the International Monetary Fund's former chief economist says the Federal Reserve should consider raising rates, even as almost 10 percent of the U.S. workforce remains unemployed. Interest rates near zero risk fanning asset bubbles or propping up inefficient companies, say Rajan and William White, former head of the Bank for International Settlements' monetary and economic department. After Europe's debt crisis recedes, Fed Chairman Ben S. Bernanke should start increasing his benchmark rate by as much as 2 percentage points so it's no longer negative in real terms, Rajan says." White says to Bloomberg, "Low rates are not a free lunch, but people are acting as though they are. There will be pressure on central banks to follow an expansionary monetary policy, and I worry that one can see the benefits, but what people inadequately appreciate are the downsides."
