The Wall Street captured media still wants you to believe the Fed’s carny show of controlling interest rates. It’s just silly.
I saw a tweet this morning from a leading Street flack that the market has “priced in” 75 basis points. What do they mean priced in? The price is the price. The rate is the price. It’s the market. It’s been obvious through this entire cycle that the Fed just follows the market. It’s always late, and it never catches up.
The money markets are tight and constantly getting tighter. Interest rates, such as that on the 13 week T-bill, which is a more or less real market, are the meter of market tightness. The Fed’s changes in the Fed Funds target are not a real rate. There’s no real Fed Funds market. Reserves remain plentiful, as evidenced by the $2.3 trillion that various money holders have deposited in the Fed’s RRPs. Only troubled banks borrow in the rigged Fed Funds market. The Fed funds market is a shadow of what it once was before the Fed started ballooning bank reserves in late 2008.
