For the actual process of setting wages and prices, it is the expectations of the public that matter most. Since our last strategy review there has been more research on how consumers and firms form their inflation expectations.
As a result, increased risk-taking by the GSEs does not significantly increase their cost of funding or reduce their access to credit, as it would for other private firms. Indeed, as I have already noted, GSE debt trades at a narrow spread over U.S. Treasury debt and at spreads below those of other highly rated financial institutions, including the largest U.S. bank holding companies.