Negative Real Interest Rate

LONGER-TERM interest rates have been low for quite some time now across much of the rich world, and there is little sign of an upturn any time soon. This is disconcerting. As Ben Bernanke put it in an interesting speech delivered Friday, there are two reasons to worry about low long-term rates: that they'll rise and that they won't. As rates remain low, financial market participants may be encouraged to "reach for yield", by taking dangerous risks and leveraging up.

Federal Reserve Chair Ben Bernanke last week released a statement of how the Fed intends to manage its bloated balance sheet over the next few years. Here I offer my interpretation of what his plan involves.

I’m not the one saying it–that would be Robert Samuelson, columnist for Newsweek and the Washington Post. The sole point of Samuelson’s recent opinion piece is that Ben Bernanke’s job is to increase confidence.

In my previous post, I cited Jeff Frieden's and my proposal for a conditional inflation target.

THE Bureau of Labour Statistics has released its latest inflation figures, providing us with an opportunity to reflect on where the American macroeconomy is heading. The producer price and consumer price releases showed similar trends. Both core and headline inflation ticked up, but the core increase was much more subdued. Core producer prices rose 2.1% in the 12 months to April, up from 2.0% in March. Core consumer prices rose 1.3% in the 12 months to April, up from 1.2% in March.