Also in this playlist...
This transcript is automatically generated
I've got to be very much aware of interest rates and what they're doing well yesterday we had a Harvard professor on the show.
He told us that long term interest rates are on the way up okay golf map.
What about short term interest rates -- next guest says short term -- that's a different story.
Is James -- -- he's the chief economist at the American Bankers Association joining us from Washington.
James so what -- say short term interest us on not gonna go up.
Now they're not gonna go -- probably Intel the first quarter of 2015.
There's there's three things that that I think need to be separated here the first is the Fed is going to at some point probably the end of this year.
Stop its 85 billion monthly purchases the second thing that happens is they've got to decide whether or not to replace those things that are.
Maturing or let that roll off.
And the third thing which is what effect says short term interest rates is how they unwind -- two trillion that they've added over the last few years.
And how they you know poll that money back and I start to have raise interest rates.
I care what I see long term rates go up I think maybe that's a bit of a negative for the housing market.
When -- see short term interest rates stay out virtually zero I think.
Maybe that's pretty good news for the economy out of course for the banks so all you talk -- -- your own book -- -- our you know what happens -- short term rates is you are keeping money fairly cheap for borrowers.
And that's the whole idea right is to encourage those businesses to borrow.
And expand their businesses as you know banks were kind of spread you've got to pay for money -- you have to lend that money out and -- that spread is narrowed a -- it stays fairly constant regardless of what the interest rates cycle is so.
It's good for borrowers and that's exactly what the Fed policy is trying to end and sent.
I don't I don't wanna get technical but there is cynical to yield club of -- -- long term rates go up and short term -- state very very low.
That's the yield -- goes up that implies.
That you're gonna have a nice economic expansion.
Is that what you say.
Well exactly and I think that's what the Fed is trying to do now as you know they've been doing that QE3 in trying to keep those the longer term rates stand keep mortgage rates -- by their mortgage.
Back security purchases.
That will probably start to you know rise as we've seen over the last a month or so.
But having that solid yield curve gets us back to a normal situation where we want to be if we want this economy on solid footing for a long time.
I'm James I know you like about free money coming you bankers from the -- -- -- you'll like it.
James just an American hit it doesn't take but not that well I think it's good money for borrowers -- as you know I -- -- find talking points.
James thank you very much -- appreciate it --
Filter by section