Category Archives: Interest Rates

A Keynesian Opportunity Missed. Did We Take Low Interest Rates for Granted? – NY Times. 

The era of superlow interest rates, which began in 2008, will draw to a close this year if, as expected, the Federal Reserve lifts rates to fend off inflation from tax cuts and spending increases under a Trump administration.

The end of rock-bottom rates represents a huge missed opportunity for generations of Americans. Congress could have — and should have — used those near-zero rates to borrow money to rebuild the country’s decrepit infrastructure, which would have sped up the recovery by creating jobs and set the stage for growth long into the future.

That chance was squandered. After Republicans won control of the House in 2010, they managed to shift the debate from economic-recovery spending to deficit reduction. They did this despite evidence that the still-weak economy required more, not less, federal aid, and even threatened to default on the national debt unless federal spending was slashed. In 2013 and 2014, the budget was cut so deeply that the government sector subtracted from economic growth. In 2015, the government added nothing to growth. In 2016, it added a smidgen.

New York Times

Fed rate hike a milestone for world markets – Jamie Gray. 

US Federal Reserve chair Janet Yellen’s announcement of an official rate hike marked a significant milestone for the world’s financial markets.

In one of the year’s most anticipated market events, the Fed raised its official fed funds rate by 25 basis points to a range of 0.5 to 0.75 per cent.

While the hike came as a surprise to no one, the Fed’s projection that it could raise rates three more times in 2017 was seen as a more aggressive, or hawkish, stance than was generally expected.

The US 10-year bond yield bumped up to 2.57 per cent for the first time since 2014, giving investors yet more evidence that world interest rates are finally on the move after a seemingly interminable post-Global Financial Crisis hiatus.

At 0.5 to 0.75 per cent, the fed funds rate is still a long way short of the 3 per cent norm. 

NZ Herald

Janet is saying: “interest rates are going nowhere but UP!”.