Friday, April 8, 2016

What tools does the Fed have left? Part 2: Targeting longer-term interest rates 
via Brookings  The Blog of Ben Bernanke, former Fed Reserve Chief.


(MoGN Blog Ed. Note:)
-Each round of QE has had diminishing effects

-The Fed reserve is left with the option of taking short term reates to zero or negative rates
-Changing long term rates by manipulating Treasury Bill yields (longer than ten year terms)
Bernanke's blog entry:

 As I discussed in my previous post, some tools remain in the monetary toolbox, including taking the short-term interest rate to zero, forward guidance about the future path of short-term rates, more Fed purchases of securities (quantitative easing), and negative short-term rates—a tool used in Europe and Japan but not so far in the US. Collectively, these actions could provide meaningful stimulus to a flagging economy. But what if still more accommodation were needed? In this post and the next I’ll discuss additional options, focusing today on targeting longer-term rates. I conclude that rate targeting can be a useful additional tool for the Fed, complementary to forward guidance and quantitative easing; but, as is the case with other monetary tools, there are ultimately limits to what it can achieve.

Former fed reserve chief Ben Bernanke's Blog is HERE 

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