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The puzzle of low interest rates
Story Date: 12/14/2020
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Source: N. Gregory Mankiw, NY TIMES, 12/4/20
In the evolution of the U.S. economy over the past four decades, one fact stands out as especially puzzling: the large and fairly steady decline in interest rates. Consider what has happened to three key benchmarks. In September 1981, the 10-year Treasury note yielded over 15 percent. Today, it yields less than 1 percent. Over the same period, the critical short-term rate set by the Federal Reserve, the federal funds rate, has fallen to nearly zero from about 16 percent, and the rate on 30-year mortgages has dropped below 3 percent from over 18 percent.
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