At what stage in a recession should the Fed institute an arguably insecure expansionary monetary policy-namely, aggressive Fed purchasing of long-term Treasury bonds? Federal Reserve Board Chairman Ben Bernanke faced this question in 2009. Acceptable for both core and elective MBA courses in international financial markets, this case examines the risks related to a policy perilously close to monetizing the budget shortage.
Students believe the factors following the current and future levels of U.S. long-term interest rates from Bernanke's view. Already, the Federal Open Market Committee had lowered the federal funds rate from 5.25% in 2007 to around 0%; it had also started an almost unfathomable effort to free up frozen credit markets and easing credit to loosen financial conditions even further.
PUBLICATION DATE: November 25, 2009 PRODUCT #: UV3951-PDF-ENG
This is just an excerpt. This case is about GLOBAL BUSINESS
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