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Plosser says Fed does not fully understand low U.S. yields -Fox
February 9, 2015 / 4:01 PM / 3 years ago

Plosser says Fed does not fully understand low U.S. yields -Fox

NEW YORK, Feb 9 (Reuters) - A “flight to safety” partly explains the currently low U.S. bond yields but the Federal Reserve does not fully understand why long-term borrowing costs are so cheap, Philadelphia Fed President Charles Plosser said on Monday.

“I think we don’t fully understand that,” he said of the declining 10-year Treasury yield. “Clearly one thing that’s going on is that, as rates are going down in Europe and other parts of the world, there is a flight to the U.S. which is the only place that is doing well. So there’s safety,” he said on Fox Business TV.

Plosser, who is retiring March 1, predicted it would take five to 10 years for the Fed to shrink its balance sheet back town to a more normal level, from about $4.5 trillion now.

Reporting by Jonathan Spicer; Editing by Chizu Nomiyama

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