Interest Rates Archive

Interest rates and consumption

Who would have thought? ;) Thanks Art. The equation at the core of modern macro By Noah Smith “…the Euler Equation says that if interest rates are high, you put off consumption more. That makes sense, right? Money markets basically pay you not to consume today. The more they pay you, the ...Read More

History will have a field day with this one!

After watching Japan for 20 years and the US for the last 5 he never did figure out that low rates impart a deflationary bias. From Keynes: Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally. Book 4, Chapter 12, Section 5, p. 158 ...Read More

Yes, the Fed can set mortgage rates if it wants to!

One of the main reasons for the Fed’s (near) 0 rate policy is to support the housing market. And after nearly 5 years of 0 rates, and mortgage rates dipping below 3.5%, though ‘off the bottom’ housing remains far below what would be considered ‘normal’. And then, not long ago, and immediately ...Read More

How Concerned is Bernanke about his possible legacy?

I suspect the Chairman is seriously concerned about living out his life with his legacy, as told by the mainstream, going something like this: “Blindsided by an intense financial crisis, the Chairman, a champion of full employment and student of the Great Depression, did everything he could come up with to support ...Read More

fed rate setting

Of course all they have to do is pay interest on all reserve balances… Fed Moves Toward New Tool for Setting Rates (WSJ) An experimental bond-trading program being run at the Federal Reserve Bank of New York could fundamentally change the way the central bank sets interest rates. Fed officials see the ...Read More

Federal Reserve Interest Rates Should Be Near Zero Forever

Federal Reserve Interest Rates Should Be Near Zero Forever By Warren Mosler ...Read More

Bernanke and Yellen pushing back on higher mortgage rates

Seems to me the Fed is making an all out effort to push back on the higher longer term rates, particularly mortgage rates. However, at least so far those rates remain elevated and at least so far mortgage purchase applications remain down year over year. Again, seems to me it comes down ...Read More

Be the Fed

So imagine you are a moderate FOMC member. Mortgage apps are down, new home sales marginal, and private sector job creation sagging. And you keep revising your GDP forecast lower at each meeting. Likewise inflation remains low, and you believe the risks are asymmetrical. That is, you know you can stop inflation ...Read More

Fed–Williams uber dovish

Looks to me like there’s been more push back on rates due to risks to housing, perceived to be the most rate sensitive ‘engine of growth’. I don’t think this Fed wants its legacy to be ‘just when things got going after 5 years of hard work the let rates go up ...Read More

Comments on Volcker article

Here’s my take on the Volcker article My comments in below: The Fed & Big Banking at the Crossroads By Paul Volcker I have been struck by parallels between the challenges facing the Federal Reserve today and those when I first entered the Federal Reserve System as a neophyte economist in 1949. ...Read More