We know that the fed has already cut the discount rate, but have they also cut the fed funds rate? They haven’t announced it, but it looks like they already have effectively cut it to 5.00%. Looking at the data from the federal reserves web site:
we see that they came within one basis point of their target rate of 5.25% for 13 months. But last month they missed their target by 23 basis points. Down to an effective fed funds rate of 5.02%
I don’t know much about how the Fed sets rates, but this seems more to me like either banks have enough liquidity and are lending to each other very freely, or that there is not much demand to borrow from each other, so the rates go down accordingly. I may be way off, though.
I do remember seeing a graph when the liquidity crunch started, where that rate was all over the place for a few days – way up then way down – before it stabilized a bit.
Its business as usual. The FFR is a ‘target’ rate and the actual rate is a ‘range’ acheived through ‘open market operations’ –transactions. The fed cut everyone is touting (CNC+BC, et al.) is a pshycological move to appease investors to fork over their money.
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