Tuesday, 23 September 2014

Time Preference and Long-Term US Interest Rates

By Frank Shostak

After closing at 3.03 percent in December 2013, the yield on the 10-year US T-Note has been trending down, closing at 2.34 percent by August this year. Many commentators are puzzled by this, given the optimistic forecasts for economic activity by Fed policy makers.

According to mainstream thinking, the central bank is the key factor in determining interest rates. By setting short-term interest rates, the central bank, it is argued, through expectations about the future course of its interest rate policy, influences the entire interest rate structure. 

Read the article here.