1 / 11

Long-Term Interest Rates

Long-Term Interest Rates. Bernanke speech at San Francisco Fed on March 1. In the News. Context: concerns about investors increasing risk-taking activities is leading some policymakers to want Fed to curtail quantitative easing

irish
Download Presentation

Long-Term Interest Rates

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Long-Term Interest Rates Bernanke speech at San Francisco Fed on March 1

  2. In the News • Context: concerns about investors increasing risk-taking activities is leading some policymakers to want Fed to curtail quantitative easing • Bernanke’s goal: explain why continued monetary accommodation is sensible

  3. In the News • Long-term interest rates have declined in many countries (Chart 1)

  4. In the News • Why are long-term interest rates so low? (Chart 2) • Low expected inflation • Low expected future short-term interest rates • Low term premium • Theory of term structure of interest rates

  5. In the News • Long-term real interest rates are also low, not just nominal rates (Chart 3) • Based on inflation-indexed bonds

  6. In the News • How will long-term rates change in the future? • Alternative forecasts (Chart 4) • But much uncertainty about these forecasts

  7. In the News • What are the risks from higher interest rates? • Investors reaching for yield, going long, will suffer capital losses • What should the Fed do? • Oversight of financial system, looking for systemic vulnerabilities • Make sure banks have sufficient capital and liquidity to survive a sharp rise in interest rates • Mitigate the risk by not raising rates as quickly • The Fed should NOT stop its accommodative policies because slowing down the economy would worsen economy, making long rates low longer

More Related