Fed Governor Elizabeth Duke: Gas prices hurt consumer

On Tuesday May 24, 2011, 10:58 am EDT
By Kristina Cooke

PHILADELPHIA (Reuters) – Consumers are struggling with higher gasoline costs and a weak housing market, Federal Reserve Governor Elizabeth Duke said on Tuesday, in remarks that suggested she is unlikely to be pressing for higher interest rates soon.

Federal Reserve Bank of St. Louis President James Bullard struck a similar tone in a speech late Monday, saying a pause once the $600 billion quantitative easing program ends in June would give the Fed time to assess the strength of the economy. Bullard said U.S. economic growth had disappointed in the first half of the year.

The Fed cut interest rates to near zero in December 2008 and has kept them there since. Bullard said keeping monetary policy on hold signals no change to the Fed’s pledge to hold rates extremely low for an extended period.

Duke’s remarks, while focused primarily on financial literacy, offered a flavor of her views on the economy.

“The financial crisis and the slow recovery from it has obviously had a dramatic impact on the financial decisions made by American families. Many now have fewer financial resources and limited options,” Duke told a conference sponsored by the Boston Fed.

“Many families, particularly those with low-to-moderate incomes, are actually facing the decision between buying gas to drive long distances to work and paying their mortgage.”

After a retreat in crude oil prices, U.S. gasoline costs fell to $3.85 a gallon in the latest week, the lowest level in five weeks, the Energy Department said on Monday. Although prices are down 11.1 cents from the previous week, the national gasoline price is still $1.06 higher than a year ago.