Sunday, January 03, 2010

Ben Bernanke hints at higher interest rates in the future

In a speech Sunday, Federal Reserve Chairman Ben Bernanke hinted that higher interest rates could be needed in the future as a tool of regulation to help control and prevent financial bubbles. Could this sour investors this week?

Bernanke spoke at the American Economic Association in Atlanta (Vanderbilt link here).

However in the short run the Fed expects to keep the lending rate near zero when it meets later in January.

Ultra low interest rates were put in after 9/11 to help contain the recession, and to some extent the technique worked. By 2003 the job market was getting better. But housing took off in a bubble, fed by derivatives, and policy makers did not seem to get the idea that this was not sustainable.

The AP story was reproduced on MSNBC here.

As a retiree, I even got a couple random calls to go out and sell mortgages, something in which I had no experience. I did not bite.

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