Our graph shows the interest rate on 10-year Treasuries from April 1, 2009 to now. Notice a bit of interest rate volatility with rates at times climbing to around 4 percent but the current interest rate being near 2.6 percent.
Scott Lanman and Simon Kennedy report that Raghuram Rajan is arguing for tight monetary policy. Paul Krugman rightfully ridicules this policy recommendation but he lets this particular line go untouched:
Between June 3 and June 8, 2009, yields on 10-year Treasuries rose to 3.88 percent from 3.54 percent after the smallest drop in U.S. payrolls in eight months
Why do we care that interest rates rose by 34 basis points in a week over a year ago in light of the fact that the interest rate on 10-year Treasury bills is now done around 2.6 percent? Does Lanman and Kennedy really think the slightest tendency to see decent real GDP growth is going to cause rising inflation and nominal interest rates?