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Taylor Say Fed May Have to Raise Rates Early in 2010 (Update1)

• Bloomberg
Treasury Secretary Timothy Geithner said yesterday that the government is moving to withdraw some of its support for financial markets. “He’s right to be pointing out that it’s time to be thinking about it,” Taylor said today. “The Fed’s balance sheet has just exploded. They’ve got to find a way to bring it down.” The U.S. this quarter will emerge from the worst recession since the 1930s, economists say. The economy will grow at a 2.9 percent annual rate from July through September, according to the median of 61 estimates in a monthly Bloomberg News survey. Budget Deficit In an interview on Bloomberg Radio today, Taylor said the $787 billion stimulus package will add to the federal budget deficit and called that “potentially inflationary.” The budget shortfall will probably total $1.6 trillion this year, according to the Congressional Budget Office. Of the stimulus plan, Taylor said “we don’t see it having much impact yet.” He said that in California, only $10 million of $3.5 billion for infrastructure projects has been paid out.

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