This decrease in rates creates another opportunity -- perhaps the last one for this rate cycle -- for Uncle Sam to borrow. A broad assortment of long-term projects requires attention and low rates make it the ideal time
Even after five years of the Fed’s most aggressive accommodative policy in history, there is still a lack of hoped for quality credit creation in the economy, which could be a sign that the greatest deleveraging of the U.S. economy since the Great Depression is still not complete. The Fed’s unrelenting dovish policy appears to support this concern.
The January statement released minutes ago is practically identical to the prior month and contains the highly anticipated continuation of measured reduction in the monthly pace of bond purchases. The FOMC voted unanimously, and we don’t recall off hand the last time that happened.
Emerging-market currencies had their worst selloff in five years yesterday. The U.S. 10-year yield fell three basis points, or 0.03 percentage point, to 2.75% as we seem to be experiencing a “global flight to quality.”
Ben Bernanke recently said the Fed is not overly concerned at the moment that there are bubbles forming in the financial system, although he stressed the Fed is “watching vigilantly” for such risks. Based on the Fed’s track record, there would be no bubbles if they had that foresight.