MEDIA
The Fed and the Department of Public Works
By Deron T. McCoy, CFA®, CFP®, CAIA®
Chief Investment Officer
Perhaps there’s no easier way to put people to sleep then by talking at length about the Federal Reserve. All I need to do is mention the words ‘repo rate’ or ‘discount window’ and most people’s eyes start glazing over as they stifle a yawn. But wait…bear with me for just a second.
Over the weekend, investors were anxiously waiting to see if the Fed would again cut interest rates, perhaps even moving the short-term Fed Funds rate down to zero. And in dramatic fashion on Sunday, the Fed took rates to zero. While the move might help loosen financial conditions, it’s not the main problem that deserves our attention. Jim Grant of Grant’s Interest Rate Observer reminds us that “interest rates are prices,” and while the cost of money is important, it’s not the be-all and end-all.
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