• Latest
  • Trending
  • All

Years of low interest rates made the current economic crisis worse, Fed’s Rosengren says

October 8, 2020 11:13
Dollar lacks upside momentum due to lower Treasury yields

Currency markets muted ahead of jobs report

August 5, 2022 09:01
Stock markets rebound on strong corporate earnings

Markets look tepid ahead of NFP data

August 5, 2022 08:53
Dollar lacks upside momentum due to lower Treasury yields

USD bulls stay out of the game

August 4, 2022 08:31
Investor sentiment looks neutral at the start of the week

Risk sentiment turns positive, but caution persists

August 4, 2022 08:25
Dollar lacks upside momentum due to lower Treasury yields

US dollar resists the selling pressure

August 3, 2022 11:01
Nancy Pelosi’s stomach-turning impeachment charade damages America

Risk tones keep tentative after Pelosi’s Taiwan visit

August 3, 2022 10:54
Dollar lacks upside momentum due to lower Treasury yields

Dollar trims losses but stays depressed

August 2, 2022 06:53
Markets hit by rising tensions between the United States and China

US-China tensions trigger risk-off trades across the markets

August 2, 2022 06:42
Dollar lacks upside momentum due to lower Treasury yields

Greenback remains on the back foot

August 1, 2022 06:36
Investors unsettled despite solid corporate earnings

Risk appetite looks tepid at the start of the week and the month

August 1, 2022 06:30
Dollar lacks upside momentum due to lower Treasury yields

Dollar set to trim losses further

July 29, 2022 06:37
Investor sentiment remains unstable amid geopolitical developments

Risk demand turns more measured ahead of the weekend

July 29, 2022 06:28
  • Terms & Сonditions
  • Contact
Tuesday, August 9, 2022
FWNews - pulse of the forex market
  • FUNDAMENTALS
    Stock markets rebound on strong corporate earnings

    Markets look tepid ahead of NFP data

    Investor sentiment looks neutral at the start of the week

    Risk sentiment turns positive, but caution persists

    Nancy Pelosi’s stomach-turning impeachment charade damages America

    Risk tones keep tentative after Pelosi’s Taiwan visit

    Markets hit by rising tensions between the United States and China

    US-China tensions trigger risk-off trades across the markets

    Investors unsettled despite solid corporate earnings

    Risk appetite looks tepid at the start of the week and the month

    Investor sentiment remains unstable amid geopolitical developments

    Risk demand turns more measured ahead of the weekend

    Risk sentiment keeps deteriorating, dollar climbs

    Fed-induced rally fades, dollar steadies

    Investors stay nervous as tensions escalate

    Investors cautiously optimistic ahead of FOMC verdict

    Equity markets mixed ahead of the weekend

    Markets mixed as Fed meeting looms

  • TECHNICALS
  • Interest Rates
  • Economic calendar
  • Backstage
No Result
View All Result
FWNews - pulse of the forex market
  • FUNDAMENTALS
    Stock markets rebound on strong corporate earnings

    Markets look tepid ahead of NFP data

    Investor sentiment looks neutral at the start of the week

    Risk sentiment turns positive, but caution persists

    Nancy Pelosi’s stomach-turning impeachment charade damages America

    Risk tones keep tentative after Pelosi’s Taiwan visit

    Markets hit by rising tensions between the United States and China

    US-China tensions trigger risk-off trades across the markets

    Investors unsettled despite solid corporate earnings

    Risk appetite looks tepid at the start of the week and the month

    Investor sentiment remains unstable amid geopolitical developments

    Risk demand turns more measured ahead of the weekend

    Risk sentiment keeps deteriorating, dollar climbs

    Fed-induced rally fades, dollar steadies

    Investors stay nervous as tensions escalate

    Investors cautiously optimistic ahead of FOMC verdict

    Equity markets mixed ahead of the weekend

    Markets mixed as Fed meeting looms

  • TECHNICALS
  • Interest Rates
  • Economic calendar
  • Backstage
No Result
View All Result
FWNews - pulse of the forex market
No Result
View All Result

Home » Years of low interest rates made the current economic crisis worse, Fed’s Rosengren says

Years of low interest rates made the current economic crisis worse, Fed’s Rosengren says

by FWNews
October 8, 2020 11:13
in News
0

Years of low interest rates led to excessive risk taking in commercial real estate and will make the current economic downturn even more severe, Boston Federal Reserve President Eric Rosengren said Thursday.

The central bank official said he expects a wave of defaults and bankruptcies to hit that will aggravate an unemployment problem that has hit lower-wage workers disproportionately.

Regulatory authorities, he added, should have been able to see conditions building up that would make any unexpected crisis worse.

“Clearly a deadly pandemic was bound to badly impact the economy,” Rosengren said. “However, I am sorry to say that the slow build-up of risk in the low-interest-rate environment that preceded the current recession likely will make the economic recovery from the pandemic more difficult.”

The Fed has been at the center of the coronavirus pandemic crisis response, slashing already-low interest rates and implementing a slew of programs to ensure market functioning and lend money to areas of the economy in need.

In recent days, it has adapted an even more dovish approach to monetary policy, pledging not to raise rates even if inflation runs above the Fed’s preferred 2% target.

A loose Fed also often finds itself the target during times of excess, like the financial crisis and the dotcom bubble. Rosengren’s remarks reflected concern about the consequences of the low rates that have prevailed for the past dozen years.

He noted that commercial real estate firms have “gradually increased risk by taking on more leverage, which magnifies returns with good outcomes – but also magnifies losses when bad outcomes occur.

“This increase in risk-taking is more likely to take place in a low-interest environment, like the one which prevailed in the aftermath of (and as a result of) the financial crisis and Great Recession.”

He specifically cited “low rates persisting for an extended period even after the economy has made progress in the recovery” as was the case when the Fed held its benchmark short-term lending rate near zero for more than six years after the Great Recession ended in 2009.

In those times, “businesses and firms take on additional debt and accumulate more risky assets in search of better returns – potentially bidding up asset prices to unsustainable levels,” he said.

Consequences from that climate are likely to be felt soon with looming debt defaults and business failures he said, adding that the impact on banks, particularly smaller institutions, is likely the reason for the sector’s stock market underperformance.

He also spoke about the impact on employment, particularly workers in the services industries who have taken the hardest hit during the current downturn.

“The build-up in risks in commercial real estate, and leverage in the corporate sector, prior to the COVID-19 pandemic are likely to result in more bankruptcies and higher unemployment during this crisis than if less risk had been taken,” he said.

While banks currently have strong capital positions, lending standards are tight. Rosengren said the financial system’s placement at the center of multiple economic crises should cause officials to consider the implications of “reach-for-yield” environments.

Share2Tweet1
ADVERTISEMENT
FWNews

FWNews

Track the pulse of the market

Related Posts

Dollar lacks upside momentum due to lower Treasury yields
Technical analysis

Currency markets muted ahead of jobs report

August 5, 2022 09:01
16
Stock markets rebound on strong corporate earnings
Fundamental analysis

Markets look tepid ahead of NFP data

August 5, 2022 08:53
12
Dollar lacks upside momentum due to lower Treasury yields
Technical analysis

USD bulls stay out of the game

August 4, 2022 08:31
16
Investor sentiment looks neutral at the start of the week
Fundamental analysis

Risk sentiment turns positive, but caution persists

August 4, 2022 08:25
15
Dollar lacks upside momentum due to lower Treasury yields
Technical analysis

US dollar resists the selling pressure

August 3, 2022 11:01
20
Nancy Pelosi’s stomach-turning impeachment charade damages America
Fundamental analysis

Risk tones keep tentative after Pelosi’s Taiwan visit

August 3, 2022 10:54
19

Leave Your Opinion Cancel reply

Your email address will not be published. Required fields are marked *

Recommended

Dollar lacks upside momentum due to lower Treasury yields

Dollar keeps bleeding even as risk rally fades

March 30, 2022 06:44
11
Dollar lacks upside momentum due to lower Treasury yields

High-yielding currencies stay on the defensive

March 2, 2022 11:15
10
Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in Canada during April 2019

Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in Canada during April 2019

September 16, 2019 17:23
10

Ads

Shneider Electric

Most Popular

A slow start to the week in FX markets
Technical analysis

Dollar regains ground to start the week

January 25, 2021 07:25
118
A slow start to the week in FX markets
Technical analysis

Greenback advances modestly amid strong data

May 28, 2021 07:38
110
Kim Jong Un reportedly says his nuclear weapons guarantee there will be no more war
News

Kim Jong Un reportedly says his nuclear weapons guarantee there will be no more war

July 28, 2020 08:29
95
FWNews

Copyright © 2022 FWNews

  • Terms & Сonditions
  • Contact
No Result
View All Result
  • FUNDAMENTALS
  • TECHNICALS
  • Interest Rates
  • Economic calendar
  • Backstage

Copyright © 2022 FWNews