Do You Know How The Fed Cuts Interest Rates?
Posted September 24, 2024
You will have heard that the Fed reduced the Federal Funds Rate by 50 basis points last week.
But do you know HOW the Fed cuts interest rates?
The method the Fed uses to control the Federal Funds Rate now is very different from the method it used before it launched Quantitative Easing in late 2008.
This week’s Macro Watch video explains the Fed’s new method for controlling interest rates and discusses why the Fed was compelled to adopt a new method in the first place.
This video makes clear that interest rates today would be much lower than they are – despite the government’s very large budget deficits – if the Fed were not intervening to keep them high.
It also shows why, in addition to the Federal Funds Rate, market-determined interest rates, such as government bond yields and mortgage rates, are also likely to continue moving lower – and why the stock market could keep moving higher – during the months and quarters ahead.
For all the details, Macro Watch subscribers can log in and watch this video now.
This video is 16 minutes long and contains 30 slides that can be downloaded.
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Separately, Macro Watch has begun rolling out a series of videos called Creditism 101. The objective of this series is to explain how our economic system evolved into a very different kind of system after Dollars ceased to be backed by Gold, or, put differently, to explain how the economy really works today. Six Creditism 101 videos have been published so far.
CLICK HERE to find them in the Macro Watch archives.
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