Recent Blog Posts
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The Times' Rorshach Geithner Story
Apr 27 20099:04am EDT -
Sinking Animal Spirits
Apr 27 20098:04am EDT -
Counter-cyclical Urban Policy
Apr 26 200910:04am EDT -
Be Your Own Counterfeiter
Apr 26 20099:04am EDT -
Being Tim Geithner
Apr 25 200912:04pm EDT -
Notes From a Press Conference Naif
Apr 25 20099:04am EDT -
What Good is the News?
Apr 25 20098:04am EDT -
Stressful Enough
Apr 24 20092:04pm EDT -
Not Regretting the Pound
Apr 24 20091:04pm EDT -
Introducing the New Ford Squeeze
Apr 24 20099:04am EDT -
Non-Economic Questions of the Day
Apr 24 20099:04am EDT -
The Stress Test Blind Alley
Apr 24 20098:04am EDT -
Happy Hour
Apr 23 20099:04pm EDT -
Recovery Without Rebalancing
Apr 23 20096:04pm EDT -
The Shape of Your Recession
Apr 23 20095:04pm EDT
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Fed Funds Update
Just before I went on holiday on August, I offered up a cheeky chart of the Fed funds rate, suggesting that the Fed had stealthily cut rates between meetings. (This was before it actually cut the discount rate.) Greg Mankiw resurrects the meme today, noting that the Fed funds rate for August as a whole was 5.02% – essentially a quarter-point lower than the official target rate of 5.25%.
So here's an updated version of the chart, showing what's really been happening to the Fed funds rate of late.
Messy, eh?
It seems to me that the Fed has much more important things to do right now than fiddle about in the overnight markets trying to ensure that the Fed funds rate always ends the day within a basis point or two of the target rate. And given the general screwiness at the short end of the curve, a bit of volatility here is only to be expected: trying to keep this number in a very narrow range would probably be impossible in any event.
It almost seems to obvious to mention, but the target Fed funds rate is vastly more important, especially at a time like this, than the actual Fed funds rate. If and when credit markets calm down a little, then we can start worrying about whether the Fed is hitting its target.
