Question

What might have caused long-term interest rates to rise in late 2010, even though the federal funds rate was still zero?

Answer 1

I think the main reason behind this was the bankruptcy of Lehman Brothers.you can check whole history about the case which caused wall street to fall. After the real state faced huge losses this step was to keep banks functioning.it was ti recover from recent recession.with low interest rate americans started to buy more and more with loan but managed to pay off.investment started to grow as people found investment a better deal when interest rate were low.people began to buy more while paying less.this practise needed to stop.by raising the interest rates it becomes more expensive for banks to borrow money from fed. A lower fund rate will encourage banks from borrowing from one another hence loosen the money supply.Raising the fund rate will imply to control inflation which actually did not exist then.

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