We target only the overnight rate, and traders and investors, such as those represented and serviced by those here this evening, determine longer-term interest rates on Treasury and private securities. The resulting structure of rates and spreads in the fixed-income markets can in turn be a valuable tool that we can use when analyzing the current state of macroeconomic conditions and forecasting the future.
There was a broad expectation that the private sector would take over from public sector stimulus to once again be the engine of growth: businesses would restock and reinvest, and the household sector would regain confidence. But, as local economies slowed, the costs of stimulus and rescues, low tax revenue and high demand for social spending hit government fiscal accounts hard.