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Posts Tagged With 'Fed Painted'

Has the Fed Painted Itself Into a Corner?

Last week???s Federal Reserve meeting ended with less than the usual fanfare in the financial press. It would appear editors are beginning to realize that ???Fed Does Nothing ??? Again??? doesn???t make for much of a headline.

With the Fed funds rate near zero for a year and a half now, the Fed has few places to go with monetary policy. The best it could muster last week was a decision to roll some proceeds from earlier purchases of mortgage-backed securities into the purchase of U.S. Treasury bonds.

The move to buy bonds is a technique to keep long-term interest rates low. The Fed can directly control very short-term interest rates (e.g., rates used for overnight lending to banks for liquidity purposes) but as a practical matter, longer-term rates that affect consumer loans are a function of bond market trading.

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