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Questions tagged [fed-funds-rate]

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Why does S&P 500 have a P/E Multiple of ca. 25 while other indexes (for ex. DAX) around 16?

I was thinking about a topic for my bachelor´s thesis and came across an interesting thing: P/E and other multiples of S&P500 were higher than those of other markets. Is there any research on this ...
Matsvei Voltau's user avatar
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1 answer
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If inflation rate drops, what happens to Feds Fund rate?

I know the Fed Funds rate has been increasing to lower the inflation rate, but what happens to the Feds Fund rate (will it increase, decrease, or stays constant?) after the inflation rate has been ...
HelloDarkWorld's user avatar
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A question about Ihrig et al. (2015) and the Fed's policy implementation prior to 2008

Ihrig et al. (2015) review the implementation of monetary policy in the US prior to and after the Financial Crisis of 2008-2009. In describing the Fed's approach prior to the crisis, based on open ...
Daneel Olivaw's user avatar
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Taylor Rule Model Specification: Serial Correlation and Interest Rate Smoothing

I'm reading this paper by Abrams and Iossifov. The paper investigates electoral cycles influence on monetary policy by estimating a Taylor Rule reaction function using OLS. The authors describe the ...
alvalentini's user avatar
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When Cathie Wood says the Powell has 20x rates vs Volker 2x rates in 1981, is this the right way to look at it?

Cathie Wood regularly says the FED today gone too far with rate rises, saying they have raised rates 20 times from their 0.25% lows in 2020, where as in the early 1980 Volcker only doubled rates from ...
MicroscooterMan's user avatar
2 votes
2 answers
109 views

impact of a gradual adjustment of the federal funds rate

Although the Federal Reserve has been raising interest rates for about 1 year, and inflation has slowed down, prices are not going down much. What are the benefits of raising rates slowly? Obviously ...
blue_ego's user avatar
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1 answer
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Why does decrease in Feds fund rate lead to decrease in core PCE inflation rate?

According to the Fed's own forecasts inflation should reach 2% (as vowed) shortly after 2025 under normal circumstances from the below chart. I know that generally as Federal funds rate increases, ...
HelloDarkWorld's user avatar
2 votes
1 answer
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Do U.S. Fed Interest Rate hikes and bond yields have a causal effect on each other?

I understand that there is a strong causal effect between U.S. Fed rate hikes or decreases on U.S. bond yields. But does the relationship also go the other way, e.g. U.S. Fed hikes/decreases in ...
StatsScared's user avatar
1 vote
1 answer
329 views

Are there still (2022) bank reserve requirements, and if not, how do open market operations now work with the target rate?

With several recent increases in the (U.S.) Federal Reserve's target rate, and accompanying news releases, I was refreshing my knowledge on how those changes actually operate. In the course of doing ...
Upper_Case's user avatar
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What is the effect on shelter prices of raising interest rates?

In the UK, a rise in rates causes a rise in mortgage repayments. It can lead to landlords raising rents due to margin pressure, if their mortgage is not fixed or is close to the end of its fixed ...
Luke Puplett's user avatar
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Why doesn't conventional monetary policy involve long-term interest rate targets?

Another way to phrase my question: why doesn't conventional monetary policy include manipulation of long-term interest rates? This question might sound "weird" at first glance, but please ...
J Li's user avatar
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What were the benefits of creating ON RRP (versus expanding the availability of IOR)?

I'm not understanding why the Fed decided to introduce their Overnight Reverse Repo Facility (ON RRP). From the St. Louis Fed, it helps to provide a floor for the Federal Funds Rate (FFR), a market-...
tattarrattat's user avatar
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1 answer
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How does the Fed ensure the realised overnight interbank lending right stays within the Fed Funds Rate band?

I am trying to understand how the target FFR set by the FOMC is actually realised in the overnight lending market. That is, by what mechanism does the market driven overnight lending rate converge to ...
masiewpao's user avatar
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1 vote
3 answers
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Inflation vs fed hike

If inflation continues to grow at the pace at which it’s growing won’t the inflation itself put the economy in slowdown. Why does FED have to proactively intervene to slowdown?
Sohail Khan's user avatar
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1 answer
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Why do reserves increase when the Fed buys bonds? (Introduction to Macroeconomics)

A question asks, "If the federal funds rate were above the rate the Fed had targeted, the fed could move the rate back towards its target by _" and then the options are buying/selling bonds, ...
Mnm's user avatar
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4 votes
2 answers
91 views

Are low rates a subsidy to banks?

Axel Leijonhfvud (Professor Emeritus, Department of Economics, UCLA) wrote in 2011: The Fed is supplying the banks with reserves at a near-zero rate. Not much results in bank lending to business, but ...
MWB's user avatar
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Are major banks in US necessarily going to benefit from the rise of federal fund rates?

https://wtvbam.com/2022/01/05/fed-funds-futures-see-rate-hike-in-march-after-minutes-of-policy-meeting/ It is believed that Fed is very likely to raise the Federal Fund rates in the next a couple of ...
No One's user avatar
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2 votes
1 answer
98 views

Does FED's change in short-interest rates impact long term rates?

Through changing the federal fund rate(short-term), does this empirically impact the longer end of the curve? If so, what is the logic or transmission mechanism that caused the change?
willyboy's user avatar
1 vote
2 answers
95 views

Credit risk of interest rate on excess reserves vs fed funds rate?

I noticed that the interest rate on excess reserves and the fed funds rate are almost exactly the same at all times. Why is this the case? Shouldn't the credit risk of a bank be higher than the ...
curiousgeorge's user avatar
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328 views

Why is the prime rate typically 3% higher than the fed funds rate?

What is the right framework to think about the prime rate in relation to the fed funds rate? Idea 1: A bank is safer to lend to than even trustworthy institutions so there's a premium on prime rates. ...
curiousgeorge's user avatar