The long-term interest rate conundrum: not unraveled yet?
Abstract: In congressional testimony on February 16, 2005, Federal Reserve Chairman Greenspan characterized the recent behavior of long-term interest rates as a \\"conundrum.\\" Typically, long-term rates tend to rise as monetary policymakers raise short-term rates. But not in the current episode. Despite steady monetary tightening beginning in the middle of 2004, the yields on long-term U.S. Treasury securities actually have declined since then by about 50 basis points. As a consequence, the current level of long-term interest rates seems to be well below what one would expect on the basis of economic fundamentals.
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Provider: Federal Reserve Bank of San Francisco
Part of Series: FRBSF Economic Letter
Publication Date: 2005Order Number: 08