Low interest rates may be a big help even to people who think of themselves as savers, not borrowers.
Federal Reserve Chairman Ben Bernanke made that argument Monday during a speech in Indianapolis.
Bernanke raised and answered five questions about the Federal Reserve system, inluding one about how the Fed’s current low interest rate strategy is affecting “savers and investors.”
The Fed has been keeping rates low since the start of the recession that appeared in 2008 in an effort to help businesses and home buyers borrow money at affordable rates.
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Securities and rating analysts have pointed out that insurers that provide long-term care insurance (LTCI) long-term disabiliy insurance and other forms of insurance that include embedded investment guarantees are acting savers when backing those policies.
Some LTCI market watchers have suggested that competition may be falling off in the private LTCI market partly because low rates interfere with insurers’ efforts to earn acceptable returns on general account assets.
Bernanke acknowledged that some fear the prolonged interest rates could lead to price inflation, and he also acknowledged savers’ concerns about low interest earnings.
“My colleagues and I know that people who rely on investments that pay a fixed interest rate, such as certificates of deposit, are receiving very low returns, a situation that has involved significant hardship for some,” Bernanke said.