Monday, April 5, 2010

Effective Fed Funds Rate Hits 0.21%

We are only 4 basis points away from the upper limit the Fed Funds target range. Will the Fed aggressively add funds to the system to keep the rate at 0.25%?

Two questions come to the forefront as we approach the target ceiling. If the Fed allows the rate to pierce 0.25%, how high will they allow the rate to climb. If they add funds at 0.25%, how much funds are they willing to add before raising rates?

Bottom line: The markets are taking the decision time line out of the hands of Bernanke. He will not have the luxury to decide to make a move on rates "down the road." The markets are close to forcing him to make a decision within weeks, if not days.


  1. You the man, RW. I haven't seen anyone else even talking about this, let alone noticing it a week ago.

    Can you spin out the implications of both scenarios? Sort of a Choose-Your-Own-Adventure with Ben Bernanke as the adolescent reader?

  2. Any ideas on what Bernanke is doing with TOMOs?

    It's gone from 75 billion in Jan, to around 4 billion now. Is this being offset somewhere else?