Federal Reserve Chairman Ben Bernanke said that lower-than-usual long term interest rates could prompt the central bank to either boost or lower the short-term rates even more than normal.
Speaking before the Economic Club in New York, Bernanke said the adjustments were contingent on a number of factors influencing the interest rates. One such condition, a "glut" of world saving -- the byproduct of high savings coupled with a weak investment demand on a global basis -- might be a factor in keeping long-term interest rates down.
Bernanke however, offered other explanations for low long-term interest rates, i.e. a shortage of long-term bonds or demand from pension funds, both of which would require the Fed to set its key short-term rate target higher than normal.
Bernanke said the Fed must monitor bond yields closely but "only in tandem" with other financial-market prices.
