Janet Yelen, chair of the Federal Reserve, responded to criticism regarding the feds' low interest rates.
As reported by the New York Times, after seven years of consistent low rates, Yellen responded that it actually helped create millions of jobs by lowering borrowing costs for businesses and consumers.
The U.S. Federal Reserve has also indicated that it may soon be ready to begin raising rates, while Yellen reiterated that subsequent rate hikes will be gradual.
The chair was responding to a letter sent by consumer advocate Ralph Nader, who said that he was writing on behalf of frustrated savers who have been getting near zero interests on their bank and money-market savings account.
In an open letter Nader wrote to Yellen, "We are tired of this melodrama that exploits so many people who used to rely on interest income to pay some of their essential bills." He added, "Think about the elderly among us who need to supplement their Social Security checks every month."
Nader went on to say that he doesn't want to know why the Federal Reserve, funded and heavily run by the banks, is keeping interest rates so low that consumers receive virtually no income for our hard-earned savings while the Fed lets the big banks borrow money for virtually no interest.
He also said, "It doesn't seem fair to put the burden of your Federal Reserve's monetary policies on the backs of those Americans who are the least positioned to demand fair play."
Moreover, Nader urged the Feds chair to consult her Nobel Prize winning husband, economist George Akerloff, and consider the prospect that "tens of millions of Americans, with more interest income could stimulate the economy by spending toward the necessities of life."
According to Reuters, Yellen responded by saying "thank you" to Nader's recent letter and added that she and other rate-setters were more than aware of the savers' frustrations. She added that the fundamental solution to this problem is to foster a stronger economy.
She noted that a sudden or overly aggressive increase in rates would at most, benefit the savers only temporarily. The Feds chair argued in the letter that the seven-year era of zero rates had actually sheltered American savers from dramatic declines in the value of their homes and retirement accounts.
"Many of these savers undoubtedly would have lost their jobs or pensions (or faced increased burdens from supporting unemployed children and grandchildren)," if the Feds had not acted with such force, she said.
Bloomberg Business reported that Yellen also reiterated that she and most of her colleagues are expecting the pace of policy tightening to be gradual after lift off.
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