So the Fed has never actually raised rates in this cycle. It has only tried to catch up with it. And failed.
Again, the Fed’s sham increase in the sham Fed Funds rate at 75 BP fell short of the 100 BP rise in market rates since the last Fed rate “increase” 6 weeks ago. The Fed Fake Funds rate was “raised” to 3-3.25, while the 13 week T-bill, which is a real market, trades at 3.34. The Fed just keeps running to keep up with the market.
And the Fed Funds market isn’t even a real market. Back when monetary policy and the Fed controlled rates by keeping reserves to a minimum, Fed Funds traded $300-400 billion per day. Now they trade $75-80 billion a day. And that’s just banks that are really sick. Who needs reserves today with a couple trillion in excess reserves floating around.
The Fed also “sets” interest on excess reserves and the rate on its RRP money market fund for money market funds. These are just the arbitrary giveaway rates that the Fed pays the banks and MMFs as a subsidy to keep them from going under. It’s welfare for the banks, while everybody else goes broke as consumer prices and rents skyrocket and the housing market freezes.
And yet the Fed pretends that somehow the optics of pretending to raise rates will fix the inflation problem that the Fed itself created by printing a money tsunami from 2009 to 2021.
Well good luck to them.
Originally derived from this post at Capitalstool. Join the conversation.
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