Real Interest Rates

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"Real Interest Rates"

Mark Thoma posts a detailed presentation from Mary Daly of the San Francisco Fed about the bleak economic outlook. I’d like to just pull a couple of charts out.

First this one:

Second, this one:

If you look at just the first chart, it looks like rates on things like Baa corporate debt and jumbo mortgages have returned to pre-crisis levels. But when you put the first chart in the context of the second chart, you’ll see that falling inflation and inflation expectations mean that real rates are higher than they might initially appear. Take that as a token example of how room remains for Fed actions to help restore the economic equilibrium.

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