Thursday, February 2, 2012

Low Interest Rates Are the Policy

A few weeks ago I posted about Ken Kuttner’s research showing that home prices are inelastic with respect to interest rates.

His research is in response to the common claims that maintaining interest rates at a low level for to long during the weak recovery of 2001-3 led to the housing bubble and financial crisis that started in 2007.

I don’t really think that was an issue, but some people do.

Now, the Federal Reserve is planning on pursuing exactly the same sort of policy. The current plan is to keep rates low for the next 2-3 years.

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