[Gianluca Benigno] Long-term rates and Greenspan's conundrum, inverted
After the 2001 recession, the Federal Reserve cut its policy rate, eventually to 1 percent in 2003. As the economy recovered, in 2004, it began to remove that extraordinary support, saying in June that policy accommodation "can be removed at a pace that is likely to be measured." Short-term rates rose as planned. Yet in February 2005, Alan Greenspan, then the Fed's chairman, told the US Senate that long-term interest rates had fallen even though the Fed had raised short-term rates by 1.5 percent
Oct. 15, 2026