The San Francisco Fed is out with a report saying long-term interest rates may be higher than markets expect.
“Both monetary and fiscal policy projections have been based on the view that declines in the long-run potential growth rate of the economy will in turn push down interest rates,” Glenn Rudebusch, director of economic research, and Sylvain Leduc, a vice president, wrote in a paper today.
“In contrast, examination of private-sector professional forecasts and historical data provides little evidence of such a linkage,” they wrote. “This suggests a greater risk that future interest rates may be higher than expected.”
First, they cite ‘private-sector professional forecasts’ which are just about the worst indicator of anything.
Second, the aim of QE was to drive interest rates artificially lower and, you know, maybe markets are thinking the Fed will print more if growth/inflation are low probably because, you know, that’s what the Fed will do
