Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Everything the Fed thinks it knows may be wrong

Is the Fed wrong on interest rates?

At the core of the Federal Reserve's credibility is its insistence that it can hold interest rates low enough for long enough to ensure a complete economic recovery.

The reality may prove quite a bit different, particularly if current trends hold up.

Those low yields are critical for both the public and private sector—financing upwards of a trillion dollars a year in corporate borrowing as well as helping to contain financing costs for the government's $17.5 trillion debt.

But after nearly five months of a decline in yields that caught market participants almost completely off guard, talk is increasing that inflationary pressures are building and that yields may begin to rise in a way that could put the Fed behind the curve of market forces.