Federal Reserve Chairman Ben S. Bernanke has said that the increasing borrowing costs in the previous two months are linked to the strengthening economy in the country as well as over concerns that an early rollback of the stimulus package in the US.
He said that the rising bond yields are due to unwinding of leveraged and "excessively risky" investments as the monitory policy of the authorities remain accommodative. He said in a testimony before the Senate Banking Committee that the rising borrowing costs are a result of better economic news as well as concerns over a roll back of the stimulus package by the Federal Reserve and changing bond-market bets.
Officials at the US Federal Reserve are working to calm the market sentiment after indications that the US central authority might start rolling back its stimulus package too soon. The officials are aiming to change the US monetary policy goals in order to keep the interest rates low for longer for calming markets and keep borrowing costs low. There are concerns in the government circles that the investors might push bond yields higher when the central bank introduces cuts in its bond-buying programme.
The Federal Reserve officials are trying to calm the situation by convincing investors that the Federal Reserve will not suddenly withdraw stimulus package that has helped the US economy survive the financial crisis by keeping the borrowing costs low. The reserve will continue to provide stimulus to support the recovery of the economy but has indicated that it will begin a gradual roll back.
Source: Top News