Friday, February 19, 2010

The Clueless WSJ

A lead WSJ story is, of course, on the Federal Reserve discount rate cut and the fact that it does not affect money supply or market interest rates.

Remarkably, the story goes on to state:
The discount-rate move didn't affect the Fed's main policy tool, the federal-funds rate, a Fed-influenced rate that banks charge each other on overnight loans. That benchmark rate that filters through to other market rates.
There is no mention that the Fed is about to ditch the Funds rate and target the IOER. This means Murdoch's reporter doesn't know what the hell is going on but neither does any of the "analysts" the reporter interviewed for the story.

Remarkable. It is a good thing Murdoch is building so many paywalls, this schlock should really not be for general public consumption.

1 comment:

  1. I agree that the lack of understanding of this new IOER rate is astounding. Here is another one.....

    Trying to think of a trade for this. Is there a market for some Fund Manager Surprise Factor? I want to buy some calls. Maybe there will be mass surprise and they will just liquidate stocks. Maybe that is the play..

    (AP) Jay Leupp, president of Grubb & Ellis AGA mutual funds, said it was "inevitable" that the Fed would raise the discount rate. However the timing and size of future rate hikes for both the discount rate and the federal funds rate are still up in the air, he said.