Also in this playlist...
This transcript is automatically generated
-- part of -- money we have a prestigious guest offering market Coventry for you this morning.
Paul good professor Jeffrey Frankel is with -- he's been with -- before he's good.
Professor welcome back and done I've -- -- stuff you say that interest rates fall on that weight off.
How much -- can you give me -- on the it's very hard to give at number but since you Wong -- to restore it somewhere -- -- historic norms I would say.
Eventually another 200 basis points that would need another two percentage points that would mean that the ten year treasury now just above 2% you think -- on its way to just above 4% to pass to put up a tangible number on it right.
Yeah that's right and I mean I don't think this is an unusual forecast I think most people think interest rates are very low lately and are and are gonna have to rise.
Why why are they going up like this.
Because -- read -- historic lows I mean not.
The last five -- have been a very unusual time for the economy in many respects.
Inflation and has been lower than any time since -- Eisenhower Kennedy administration's.
But nominal interest rates have been -- even lower than that.
So we've actually had negative real interest rates -- straight -- courses.
Nominal interest rate adjusted -- -- expectations of inflation.
And they've actually been negative recently well that that doesn't last that's an historical anomaly.
They have to revert to something back towards historical norm.
Now -- with interest rates as low as they on now a historic lows as you said.
We still only got 12 and a half percent growth we still got a high unemployment rate what happens to the economy.
And mediocre growth right if we go back up to 4%.
Well I don't think interest rates will go up to 4% until the -- -- the recovery is is much further along and unemployment is down quite a bit I think the Fed won't make sure that.
So I mean that forecast.
And I you know I -- I don't know when it'll happen it won't happen until the economy recovers until growth is.
I think that's what the Fed views it's a job is -- -- -- -- -- -- -- it's a sign that inflation starts to get out of control and there's no sign of that at all now night.
So your in that camp that says Ben keeps on printing what is it 85 billion dollars a month.
Until such time as the economy starts to really start to move off.
And then he may tap on the brakes so your saying essentially -- -- -- woods in your mouth but you're saying hey.
That that is not gonna -- on those brakes anytime soon.
Well of course -- at all over the last three weeks we've seen volatility in the bond market that came.
When when Bernanke made a statement about maybe you know it's possible -- an economic conditions that they might.
Taper off that.
85 billion dollars per month of purchasing long term government securities that that might happen now within a few.
-- this summer something I think the market over reacted to that.
That even if they were to do that and I don't expect it really this summer but even if they were to do that they still a long way to go before the Fed is gonna actually start raising short term interest rates.
That would be a real switch now wouldn't it we've not seen that fed deliberately raised interest rates for a long long time.
And you don't think we gonna see that any time soon can -- conclude like that.
Right -- -- 2015 probably 2015 all right we got that data and I had professor Frankel thanks very much for joining us our hope you'll come back as is again soon thank you.
My pleasure -- --
Filter by section