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Long-Term Interest Rates

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Long-Term Interest Rates

Remarks by Ben S. Bernanke, Chairman Board of Governors of the Federal Reserve System

Federal Reserve Board,

5 min read
5 take-aways
Audio & text

What's inside?

Raising long-term interest rates too soon risks damaging the recovery and could lead to an even longer period of low rates.

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Editorial Rating

8

Recommendation

In this key speech, Ben Bernanke, chairman of the Federal Reserve, summarizes the reasoning behind current policy on long-term interest rates, clarifying why a roll back now poses risks to growth and financial stability. Readers seeking a definite due date on the end of Fed easing and the arrival of higher interest rates may be disappointed. Nevertheless, getAbstract recommends his speech to all financial services professionals and investors seeking an increased understanding of the Fed’s current and future rates policy.

Summary

Interest rates have remained low in the United States and several other major developed economies since the financial crisis, with central banks applying “accommodative monetary policies” to encourage economic growth. Three factors determine “longer-term yields”:

  1. “Expected inflation over the term of the security” – The Fed maintains a “longer-run inflation target of 2%,” which has influenced long-term interest rates in recent years and eased the “strong disinflationary pressures” following the financial crisis.
  2. “Expected path of short-term real interest rates”

About the Author

Ben S. Bernanke is an economist and the chairman of the US Federal Reserve.

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