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With growth slowing and expected rates of return on investments declining, the interest rate level at which the economy remains in equilibrium will also decline, he said.
"It looks like somewhere around 7.40percentt," he said, forecasting the interest rate level at which the Treasury, when all the bids were toted up, would have found enough buyers to sell all $9 billion of the 30-year bonds.
The latter rate, hypothetical rather than directly observable, may be thought of as the interest rate level that would have to prevail for the system to remain at full employment with stable prices.
The Fed thinks the current interest rate level is still helping to stimulate the economy and top leaders at the central bank, including Fed Chair Jerome H. Powell, want to see interest rates move to a so-called "neutral level" which doesn't boost or curb growth.
Beyond some interest rate level, banks will not be able to increase the interest rate sufficiently to compensate for this risk and all lending will be made to the less risky borrowers.
Those forecasts are consistent with the Fed's statement in January that it "will be patient" in determining the future interest rate level.
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Was the ECB split over interest rate levels, or were the decisions unanimous?
Australia's faster rebound has given its central bank more leeway to return gradually to more normal interest rate levels.
"These interest rate levels are pushing extremes," he said of the decline of Treasury yields in August.
The decision had been expected after Chancellor of the Exchequer Gordon Brown said that his preliminary budget plan took a balanced approach to maintaining interest rate levels.
Those interest rate levels reached 14percentthethighestest in five years, when the government auctioned more than $800 million in short-term bonds last week.
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