Lowriding? Fed Funds Effective Rate Near Lower Bound (Time For Another Rate Cut?)

Is The Fed Lowriding its Target Rate? Or is the economy Slippin’ into darkness?

Not too long ago, the Federal Reserve’s problem was that the effective funds rate — its key policy benchmark — climbed too close to the top of its target range, prompting officials to adjust interest on excess reserves closer to the lower end of the band starting in mid-2018.

excessreserves

Now, the fed funds rate is too close to the bottom — and right in line with the current IOER rate of 1.55% — leading some to question whether policy makers will increase the latter in December. Even if it’s just 5 basis points, a small increase in interest rates after back-to-back-to-back cuts would undoubtedly raise some eyebrows on Wall Street.

slipping

Of course, with the Atlanta Fed GDPNow Q4 GDP at 0.4%, it is apparent that the US economy is slowing.

atlfedgdpnow.png

President Trump is likely singing to Fed Chair Powell “Why Can’t We Be Friends?” and lower rates.

donaldtrumpjeromepowell.jpg

 

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