Interest Rates Wages Employment And Inflation Hearing Before the Committee
Interest Rates Wages Employment And Inflation Hearing Before the Committee
United States Congress House Committee On the B
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You are quoted as saying in this book, long-term rates are not a matter of theory. Long-term rates are a matter of people making investments and anticipating where they think the econ- omy is going to go. Long-term rates have risen because of people's lack of confidence in stable prices and a decent return on the investments they make at a point in time today as opposed to the future. I mean, if long- term rates are not a function of any artificial determination like to some degree yours is, lo...ng-term rates are people betting on their investments for the future, correct? Mr. Greenspan. There are two elements involved. As best we can judge, the rise in long-term rates has been partially an expec- tation of the increased inflation and partly an expectation of real rate increases. The problem we have, as I indicated before, of separating the two is the fact we do not have adequate data. But what rough indica- tions we do have on the basis of forecasts of people's long-term in- flation expectations is it appears it is part of both.
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