the fact that they exist shows how sloppy the methods are. >> despite the counter problems, it shows they have a knock for survival. >> you can get more on that story and the others if you head to aljazeera.com. what do you want first, the good or bad news. interest rates are going up, not yet. it's hard to figure out what the good and bad is. with the oft of money so low for long, is the good news that the federal reserve is getting ready to raise rates. is the bad news the fed's conclusion that economic activity is nom chugging along in a strong way that wage

demands and price pressure would be showing up in the economy. the end of freak ash. it's "inside story". welcome to "inside story", i'm ray suarez, as the economy cratered in 2008 and '09, teetering at the edge of a full-blown depression, the federal reserve dropped the key interest rate, the rate paid by banks and credit unions basically to zero to keep money moving. it cost institutions almost nothing to borrow it. still the recovery was slow, bumpy, easily knocked off track by events in the wider economy. with now, with a fed chair at the helm, the central bank is talking about making borrowing

more expensive. mary snow looked at the impact and the push back. >> from home mortgages to credit cards, business loans to investments, all are linked to interest rates. and with benchmark rates near zero since 2008 anxiety over the economy thrust the federal reserve into a spot lights some ais unparalleled in recent history. >> you are not going to have a discussion about the economy without a group that looked like this. >> at a summit last month in wyoming, liberal activists joined economists, urging the federal reserve not a raise interest rates saying the economic recovery has not reached everyone, especially black and latino communities with jobless rates higher than the national average. cobb servive critics said policy was there, with some making a case to raise rates.

beth said that she's never seen so much attention on the federal reserve from so many groups. >> it's a shock to me. moving from zero to 25 basis points. and the response has been enormous. it's protests, call to action. everything. it's a shock. even the fed itself is divided. >> divided as the u.s. economy tries to emerge from the worst financial crisis since the great depression. the fresh stopped raising rates in 2006. there are worries that low rates poses a risk. think the housing bubble. >> when you have rates so low, liquidity, it causes investors to take undue wrists. that can mean bubbles that have to be deflated and clanses of defaults, suggesting they are

risks that most people don't take into account. another factor is the risk of inflation. it's below the 2% tart set by the fresh. the other big indicator is the jobless rate. in august, it stood at 5.1%, compared to 10%. job seekers say that number leaves out a big part of the story. i decided to pursue a plan become. the founder worked with similar groups across the country. the unemployment rate doesn't gate the people who are looking for work or sustain on jobs to make ends meet. >> from the ground floor. it's not better, it's not where it needs to be or in a position where we declare victory and raise interest rates. i believe raising interest rates will be good for the economy.

one argues the focus misses the big pictures, arguing that it shouldn't by charged with keeping employment strong, it should be in charge of supplying money. stag flayings and the housing crisis. each span 10 years or so. out of 100 years, they caused a disaster for one-third of the time. i'm unaware of an institution that could survive such a record. speaking in massachusetts. last night fed chair confirmed she and her colleagues were on track to raise rates, the first increase in a decades. just not yet. are the central bankers looking at a mixed economic pact. along with recovery is it stopping or slowing a steady with unremarkable growth.

joining me now, reference and policy director. jw, senior scholar at george mason university, and the vice president for economic policy at the center for american policy. we saw several different perspectives, and several opposed ones that were plausible. where do you come down on this. is it time to start letting that number rise gradually? >> i don't think so. i think it's too early. if you thing back to the rational for raising rates, you should be trying to stop an overheated economy. if you look at the data, wage and price is nowhere there. rising at a slow rate. there's no sign of a significant increase, which says we have

slack in economy and a shortfall in demand. if you raise it. it will back it is lowering the headline. there's no evidence that we need to stop inflation. >> aren't there distortions building in an economy where money cost nothing? >> i think that's right. while i noted the policy, i think it's time to think about a different approach. we are seven years in to one way of doing things. protests were misdirected. if they are concerned about income growth. host has gone to the top 1%, since the feds started the policy they should look at loose money, rather than encouraging

lending. probably overdid the response, reaction to the crisis and inhibited lending by studies coming out of the federal reserve. hopefully with a chance to talk about transparency which is a bipartisan issue that this debate indicates. >> the fete chair signalled that the atmosphere was going to stay the way it was. isn't it a weird way of talking down the economy. >> i think ben bernanke and janet yellen were doing a favour, reflecting the the fact that there's a lot of slack in the economy.

and taking actions by lowering the center rates, the fined rate and the candidative programme to stimulate an economy that needed a lot of help. i think i agree with josh there's evidence of a lot of slack. interest is the lowest continue been. there's unemployment among workers whom you think, economy going at a robust pace. the employment rate for prime age male workers is only about 4.5%. as recently as 2070 was # 8. and i think they were trying to reverse that, and there's a lot of gap between where we could be

and where we are. if you are going to borrow money to add to the size of your kitch in, to add plant and employees will you not do it if it costs a quarter of a per cent more. well, a quarter percent increase will translate into consumer behaviour. many interest rates from equity loans, outo loans, credit guards are tied to the prime rate and it moves with the fed fund. >> will it mean a larger increase. a quarter of a percent. half a per cent or full point. >> the best guess is lockistically. this debate is more than 257 basis points. if that's all that happens if it

was left there for a long time. not much difference will happen. a rate increase sooner rather than later signals that the fed is not willing to test the bounds of unemployment. to me that is what it's about. will they let the economy generate low unemployment. the only rational to pull back and not test low rates, we shi test that. >> we'll take a break and pick it up in a moment. why the attention on a rate increase that will lead interest rates at lows. is it the idea that a slow rise will mean the end of an historic region of money. slow to recover housing markets. households repairing family balance sheets. why the fuss. the end of freak ash.

stay with us, it's "inside story".

>> we're here to fully get into the nuances of everything that's going on, not just in this country, but around the world. getting the news from the people who are affected. >> people need to demand reform... >> ali velshi on target weeknights 10:30p et you're watching "inside story", i'm ray suarez, the end of free cash, this time on the programme. we'll look at the federal reserve's plans to raise interest rates, confirmed by the fed chair. >> as i noted most of my colleagues and i anticipate

economic assistance are likely to warrant interest rates at a gradual pace. the committee is monitoring developments abroad, but we do not anticipate that the effects of these recent develops on the u.s. economy will prove to be large enough to have a significant effect on the path for policy. >> reporter: for these reasons the prudent strategy is to tighten in a typely face and at a gradual pace. adjusting policy is needed into need of wide-incoming data we are coming to a long period at which rates for banks were close though zero. will it hurt or sayingial the health of the improvement of the economy. my guests are with me. what about josh's suggestion that we are putting the cart

before the horse. there's no sign of sustained inflation, yet we are behaving in advance as if there is. why not wait to see what happens when unemployment goes below 5%. >> i'm not going to make predictions about inflation, a lot that made predictions have been wrong. i continue to worry about asset bubbles. loose policy was a contributing factor. >> there's a lot of money sloshing around. >> money clashing around. >> there's worry about the fact that the federal funds market is out of practice.

it's distorted. amphetamines look to other tools of monetary policy, like the reverse market. and like the rate of interest. the latter a hot political football over the next few years. oversimplifying it a little bit. describing it as paying banks money not to lend. >> we are at the end of quantitative easing, aren't we. >> the big purchase of bonds every month. we stopped purchasing, they are sitting there. the question is when they'll exit the portfolio of 4.5 trillion. >> what do you think of what you heard? >> i think in terms of the dealing with asset bubbles and

equity markets, using policy way has important effects is the wrong way to go. the principal reserve and others have tools that influence companies and investment banks that can be used without having the negative effects that interest rate increases have on the real economy. for example, it's clear that the house aring market bubble was ibb plated. large financial institutions, the investment banks levered up rapidly and fed the bubble. participated in the market. the way that could have been dealt with is restrictions on

leverage to fund the breakses. those are the appropriate ones for dealing with asset bubble questions and using policy that has a sledgehammer effect if used on the real economy is a mistake. >> stand by. there's so much tension given to those hurt by the raising governments. we want to make sure what interest rates at or close to zero has down to other forms of wealth, saving or speculation. is there something on the way that will knock the froth of the stock market. stay with us, it's "inside story".

welcome back to "inside story", i hope luis suarez. the end of free cash, at least for the banks. for those living on the savings,

the low interest era has not been great. the cost of living hasn't risen in a painful way. people's savings have not paid them much income. if you can save but not at pitiful interest rates, is the stockmarket the only game in town. did reserve's worried across the broad economy, not much of a factor keep the rates too low, too long. josh, mike and jw, ply guests, are here. not everyone as been able to save money. among elderly american, savings are an important source of income. >> the primary event was the exact that we had the worst recession. it's not what the fed has been doing. pt impact of a lot of policies.

some people point to gains that resulted from that. stock prices are higher than they wouldn't have been, and boosted prices. they substantiate fall as they would have. the idea that by boosting the prices. it benefits rich and wealthy, it's not rite, and you have to look at the labour market. there's better wage growths than what you see absent policies. >> you are hoping that when you look at the pool of beneficiaries and people that are hurt by it. i think on monitory policy, yes. we have had disappointing results. fiscal policy has been an

outright. >> i'd like to see better economic policy given the constraints. i think they have to keep with the low interest raid policy. >> if you are a saver, are better times ahead. i hope so. that was an issue when i worked for the financial services. we had a video retired from the u.s. navy. living on a tixed income. who wasn't interested in equity on house prices and talked about experience living if the american angry economy. and it was the same. i'm sorry you are experiencing a negative effect. for younger workers and folks looking at house prices, i'm

willing to undertake that cost. the c.b.o. said obama has a negative impact on jobs. the federal reserve estimated that there has been limited lending. the office of financial research expressed concern. so don't take my word for if there's a lot of fixes we can do by focus appointed or working. i think the bipartisan interest in a lot of fixes that we should thing about. >> if you are on the committee to set interest rates. don't you have one against the other. aren't there winners and users. >> i think the charge is to sting eye late real growth in

the economy and maintaining stable increase, getting out of hand. i think the notion is increasing employment is the best way to deliver results. if you look at the expansion that we had during the "# 0s, when unemployment went to 4%, you see a greater increase in the bottom 90% of income distribution than you saw in the 2000's. i think a fed policy is consistent with high rates of growth, low rates of unemployment, the best way to deliver economic ruts. >> quickly, because i have to

rap. if unemployed goes below 1%, can we do it without high inflation. >> i believe we can. >> nice succinct answer. great so see you all, thanks a lot. >> thank you. >> i'll be back in a moment with the final thought of interest in the race. stay with us, it's "inside story". send us your thoughts on twitter. or follow me and get in touch, or visit our facebook page and tell us how the pending hike will affect your race or if you understand how it will affect your life. we'd love to hear your thoughts.

ask anyone who's lived through a period of high inflation, and they'll tell you it can be a little frightening. it's the enemy of planning for the long temp, the enemy of saving, since it creates an incentive to spend now, which makes the problem worse. you need a little of it to

encourage people to maintain homes. they believe will be worth more to sell them. it encourages economy stimulating personal spending. it's hard to know how much were waived been buying stocks with cheap money or that it had fewer places to go. there are target unanimous, if an employment goes too low, demand and inflation heat up. fled inflation is 2%. we are not there. the unemployment is 5%. we are close. >> if unemployment drifts down, keep an eye on the rate of inflation, if oil is cheep, we may sustain speak inflation

growth. fingers crossed. thanks for join us for inside story. see you next time. i'm ray suarez. tonight the united nations was created to put an end to war and establish global peace and security, while laws and conflicts consume the life of millions, the u.n.'s life of millions more, is the united nations a failure. and later - ranking the white house by how much aluminis earn, is that the best which. and wisconsin governor scott