Where Are Interest Rates Headed?
It was just a couple of months ago when the Fed was talking about subsidizing interest rates to 4 - 4.5%. There hasn't been a mention of any such activity since. Instead, the Fed Chairman, Ben Bernanke, announced that the Fed would be purchasing U.S. Treasuries in large quantity in an effort to push interest rates even lower.
This bold move seems to be a wiser option than simply subsidizing interest rates on mortgages directly. This move aims to directly influence interest rates while also helping keep up demand for Treasuries and aiding the support of the dollar. Side effects? Well, if you subscribe to the crowd who believe there is a current bubble developing in bond prices this could definitely expand the bubble.
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