BERKELEY, Calif. Nov 21 U.S. long-term interest
rates will rise when the Federal Reserve starts raising its
short-term policy rate, and the yield curve will also steepen
once the Fed starts trimming its balance sheet, a top Fed
official said on Saturday.
Currently, the Fed's near-zero interest rate policy, along
with its massive balance sheet, are pushing down on long-term
rates and reducing the gap between short-term and long-term
rates, John Williams said at a conference at University of
California Berkeley's Clausen Center.
The Fed's big balance sheet is currently keeping 10-year
bond yields about a percentage point lower than they otherwise
would be, Williams said.
"Some of the flatness (in the yield curve) we see today...
eventually that will move back up," Wiliams said.
(Reporting by Ann Saphir; Editing by Alan Crosby and Sandra