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Low Rates Could Be Around for Long Term





It appears that the flatter yield curve still puzzles Mr. Greenspan.

From New York Times:

Mr. Greenspan, testifying before Congress on June 20, was skeptical about theories based on low inflation expectations or on an impending slowdown. "A narrow gap between short- and long-term rates is often misread as though we're about to tilt into a recession," he said. "If that is the case, then the hypothesis that it is a weak economy which has been driving down interest rates is probably not correct."

He also expressed concern that low long-term rates had contributed to "froth" and might be feeding inflationary pressures. "And that's something which, needless to say, we are focusing on very extensively."

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