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.
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March 24, 2016 9:30am
(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)
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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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