WASHINGTON, May 26 (UPI) -- Managing a market turnaround and an economic recovery may be the next daunting task on the Federal Reserve's agenda, several economists said.
The Fed has initiated huge programs to revive specific markets and bolster the economy, but if the programs linger too long, they may trigger a period of steep inflation, The Washington Post reported Monday.
Stanford University economist John Taylor told the Post the Fed should scale back on programs that "are working least well," to soften a recovery that could turn into a V pattern, rising too quickly.
Massachusetts Institute of Technology economist Simon Johnson the economy could see a "rerun" of the problems that triggered the current recession.
Economists say low central bank lending rates helped make credit available, spurring a housing bubble, which collapsed, taking credit markets with it.
Since the recession began, the Fed has pumped $1 trillion into the economy and lowered interest rates to historic lows to revive financial systems.
But, keeping rates low too long could backfire.
"People look back now and say they overdid it; they should have raised rates earlier," Johnson said. Now, the Fed, "could make mistakes on both sides," he said.
