This later liftoff date is consistent with the Committee’s statement that “a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.” 23 Moreover, the simulations also suggest that, once liftoff from the zero lower bound occurs, it would be optimal for the federal funds rate to remain for some time below the prescriptions from a rule, such as the modified Taylor rule, that might in the past have provided a good guide to the Committee’s action.
Fortunately, capital flows so far have been adequate to finance the current account gap and going forward pressures on CAD in terms of quantum, quality and safe financing are expected to moderate, particularly as various measures are being taken to improve pace of investment in the country. 15.