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Why haven't long-term interest rates fallen?

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Abstract

In 2001, the Federal Reserve lowered the federal funds rate target more than it had in over 25 years, but long-term interest rates didn't budge. Has monetary policy become ineffective? Just the opposite, the authors argue. The stability of long-term rates shows that people don't expect inflation to rise. That confidence, especially in light of the dramatic shocks the economy experienced, attests to the success of the central bank's policies.

Suggested Citation

  • David E. Altig & Ed Nosal, 2002. "Why haven't long-term interest rates fallen?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Jan.
    • Handle: RePEc:fip:fedcec:y:2002:i:jan1
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    Keywords

    Interest rates; Federal funds rate;

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