A Quote by Ben Bernanke
Monetary policy has less room to maneuver when interest rates are close to zero, while expansionary fiscal policy is likely both more effective and less costly in terms of increased debt burden when interest rates are pinned at low levels.
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The degree of monetary policy ease should be associated with the level of real interest rates, not nominal interest rates.
With interest rates rising, gold doesn't pay an interest rate, but every other currency - it becomes not only less important to hold gold as an alternative, but more expensive to hold it as an insurance policy and so that will be a burden on the price of gold.
For highly indebted governments, low interest rates are critical to keep debt levels sustainable and ease pressure to restructure debt and recapitalize banks. The shift to a high sovereign-debt-yield equilibrium would make it impossible to achieve fiscal balance.
Monetary policy transmission encompasses the whole continuum of interest rates; of course, the central bank only determines the overnight policy rate.
The supply-side effect of a restrictive monetary policy is likely to be perverse, in that high interest rates enter into costs and thus exert inflationary pressure.
Near-zero policy rates that may be considerably expansionary in an economy with high inflation could be contractionary when inflation is too close to zero, or worse, deflation has set in.
However, in spite of the general perception that monetary policy should be conducted so as to avert deflation, a central bank cannot lower interest rates below the zero lower bound.
A higher IOER rate encourages banks to raise the interest rates they charge, putting upward pressure on market interest rates regardless of the level of reserves in the banking sector. While adjusting the IOER rate is an effective way to move market interest rates when reserves are plentiful, federal funds have generally traded below this rate.
I've always believed in expansionary monetary policy and if necessary fiscal policy when the economy is depressed.
Government should eschew suasion and directives to banks on interest rates that run counter to monetary policy actions.
The supply-side effect of a restrictive monetary policy, moreover, is likely to be perverse. High interest rates enter into costs and thus exert inflationary pressure, as well as inhibiting the expansion of capacity or the introduction of cost -reducing capital improvements.
And so Fannie Mae produces very strong results for investors in - when interest rates are high and when interest rates are low, in recession and during booms.
Monetary conditions exert an enormous influence on stock prices. Indeed, the monetary climate - primarily the trend in interest rates and Federal Reserve policy - is the dominant factor in determining the stock market's major direction.
When interest rates are high you want the average direction in which interest rates are moving to be downward; when interest rates are low you want the average direction to be upward.
In stabilizing the macroeconomic environment, we have focused on aligning fiscal with monetary policy and nudging the central bank toward the objective of more market-determined exchange rates.
Here's the interesting thing: the fact that QE and lowering interest rates almost to zero has worsened inequality, does not mean that raising interest rates will help reduce inequality.
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