Wednesday, March 02, 2005

The Mystery of Low Interest Rates

By Robert J. Samuelson, Washington Post, Wednesday, March 2, 2005; Page A17

Something strange happened on the way to higher interest rates: They declined. We're talking about rates on long-term mortgages and bonds. These rates truly affect the economy, because they influence housing and business investment. Most economists expected them to rise. But no. Last June rates on 30-year fixed mortgages averaged 6.29 percent; now they're about 5.7 percent. Federal Reserve Chairman Alan Greenspan recently called the declines a "conundrum.'' Equally puzzling is whether the declines guarantee a healthy economy -- or suggest a speculative "credit bubble.''