Last week, the Fed released minutes for the mid-October FOMC minutes where they agreed to analyze the possibility of enhancing or replacing their current forward-guidance for zero-bound interest rates.
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The Bernanke Fed has been characterized by an aggressive attack on Treasury yields through all possible means: zero-bound interest rates with a pledge to keep them at record-lows for years to come, purchases of Treasuries and mortgage-backed securities through several programs of quantitative easing (QE), and a maturity extension program dubbed Operation Twist that should push longer-term rates even lower.
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With fiat currencies being printed, short-term interest rates near the zero-bound, and real interest rates providing negative expected returns, investors have been incentivized to chase higher returns on equities and invest in real assets.
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Bernanke and several of his central bank colleagues around the world have unleashed a new era of monetary policy, marked by zero-bound nominal interest rates coupled with unprecedented and massive balance sheet expansion.
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This process makes IT even costlier when technologies that progress at different rates are bound together in the same device.
With credit quality deteriorating, default rates are bound to rise.
The conventional wisdom is that after another year or two, interest rates are bound to go up as investors penalize lawmakers for their profligate ways by demanding higher yields.
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But masts are common, and some villages are bound to develop high cancer rates through nothing more sinister than sheer bad luck.
Cuts in some bound tariffs will bite into applied rates too.
In effect, the bank now has a target range for short-term rates: the upper bound is the 1% refi rate and the lower bound is the rate the central bank pays on banks' deposits with it, currently 0.25%.
Default rates remain low but are bound to climb as the economy worsens.
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The latest FOMC statement surprised many, suggesting the economic outlook faces significant downside risks and announcing interest rates would remain zero-bound for even longer than before, until at least late-2014.
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Given this, the Federal Reserve was bound to raise short-term interest rates this week and it would have been wiser to lift them by more than the quarter-point that it opted for.
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Obviously, if the Fed targets interest rates, then 0 percent is a lower bound.
When everyone agrees that rates are headed higher, something else is bound to happen.
Look for more paralysis impacting the stock market down and the bond market up, as interest rates decline as a leading indicator of a slowdown that is bound to be unpleasant for everyone but the super-rich.
U.K. consumers, who have some of the highest personal debt levels in Europe, are bound to start watching their spending more closely this year, and many economists expect interest rates and taxes will gradually start to rise, which will crimp spending further.
Their workload is bound to increase dramatically as loans taken out in 2006 are reset (to much higher interest rates) in the early months of 2008.
There is even talk that the SNB might increase interest rates later this year (they are currently just 0.25%), something that would be bound to increase the franc's attractions.
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