Why Bernanke is in no hurry to raise rates

Flying in the face of the widespread belief that the loose monetary policy of Greenspan is responsible for the housing bubble, Bernanke said Sunday that the instrument of interest rates should be used only second spring. Explanations.

While the economic recovery continues, the U.S. financial markets await the time when the Federal Reserve will raise interest rates, currently at their lowest historical level, between 0 and 0.25%. In a speech Sunday at the American Economic Association in Atlanta, Ben Bernanke has stressed the need to strengthen financial regulation, suggesting that there would be little short-term changes in the monetary policy of the bank Central. Here's why:

The low rates are not responsible for the housing bubble that burst in 2008. The Fed is often accused of having fueled the housing bubble with interest rates extremely low which encouraged households to incur debt, sometimes well beyond their financial means. Indeed, after the bursting of the dotcom bubble and the terrorist attacks of September 11, the Fed chairman, Alan Greenspan, has drastically reduced rates to revive the economy. This has contributed to flood the market liquidity that have come feed the housing bubble. But for Bernanke, not only the reduction in rates was necessary, but above all, it was not responsible for the bubble, since the problem was in fact the lack of regulation: while the financial institutions taking huge risks by providing mortgage contracts "unconventional" to customers who could not afford to repay them, the authorities were too slow to identify and mentor those risks. The argument does not convince all economists. David Beckworth particular suggests that it is precisely this excess liquidity combined with the low return on dollar prompted investors to seek financial products more attractive returns, such as mortgage-backed securities "alien".

The monetary policy instrument is a "brutal" for the economy. The Vice-Chairman of the Fed, Donald Kohn, who insists on this point. Indeed, increasing interest rates to fight against the formation of a bubble in a specific sector penalizes the overall economy. This kind of "collateral damage" is even more risky that the U.S. recovery is still fragile: high unemployment (10%), modest revenue growth and falling real estate weigh heavily on consumer spending, the main engine of growth U.S..

No risk of inflation. One of the two objectives of the Fed is price stability. But the slow growth of wages and difficult conditions in the housing market yet discard any inflationary danger. Thus, "apart from fluctuations in energy prices and food, the basic trend is clearly downward," according to a note from Credit Agricole.

The weak dollar is an asset. Ben Bernanke did not officially admit, but the benefits of weak dollar can not escape the government. First, the depreciation of the dollar makes American products more competitive and give a boost to exports. The trade deficit was thereby reduced. Furthermore, the weak dollar also reduces the cost of American wages, which in theory allows to repatriate jobs to the United States, and thus fight against unemployment.