The Federal Reserve has not made explicit its embrace of quantitative easing or said that it is abandoning the nominal federal funds rate as its main policy instrument. But it is injecting huge volumes of extremely low-cost, short-term cash into the banking system. While the official federal funds rate stood at 1% last month, the actual rate at which banks received overnight federal funds was closer to 0.3%, as the Fed’s balance sheet ballooned from $800 billion in late September to more than $2.4 trillion in November.
So, even as private sector US growth estimates grew ever more pessimistic last month, and expectations mounted that the Fed would cut official rates by another 50 basis points this month and that nominal rates could be zero early next year, market participants might soon have to accept that the official federal funds rate is an irrelevance.
It is...
You must be a subscriber to access this archived content.
If your subscription includes access to the archive, please log in now to view.
To gain access to this content visit the subscription page or call our hotline on +44 (0)207 779 8999.
Subscribe online now and save up to 30% on your subscription.
If you are a trialist or subscriber, please enter your username and password at the top right-hand side of euromoney.com
Subscribers to Euromoney benefit from:
- 12 months access in print and online - on euromoney.com, read the latest issue early online, search for specific developments by region or sector, interrogate the results of Euromoney's benchmark polls, and view the archive dating back to 1996
- More than 30 specialist research guides free
- The results of Euromoney’s polls and surveys
- Tailored RSS news feeds direct to your desktop
- News delivered directly to your mobile device or PC
- Personalised email newsfeed of 'Top stories' and 'Breaking news'
Click here to subscribe