Monday, March 20, 2006

Bernanke: Why Are Long-Term Rates So Low?

Link To This Post

Federal Reserve Chairman Ben Bernanke spoke Monday in New York.

CNN reports:
Federal Reserve Chairman Ben Bernanke said on Monday it is hard to know why long-term interest rates are as low as they are and policy-makers need to tread cautiously as they set borrowing costs.

"The implications for monetary policy of the recent behavior of long-term yields are not at all clear-cut," Bernanke told the Economic Club of New York.

He specified that he did not consider the currently "very flat yield curve" - in which yields on short-term U.S. government debt are close to yields on long-term bonds - as a signal of a potentially significant U.S. economic slowdown, as some market analysts have worried.

Bernanke, who took over as Fed chairman on Feb. 1, was making his first public foray onto Wall Street where bond yields are a daily obsession.

In his remarks, he ran through several potential explanations for the unusually low level of U.S. bond yields despite a steady ratcheting up of short-term interest rates by the Federal Reserve and concluded "the bottom line for policy appears ambiguous."

— The Boy in the Big Housing Bubble