A Few Fed Numbers Worth a Thousand Words

Oct. 23 (Bloomberg) -- Modern central banks have beendescribed as “an army with only a signal corps.” It’s an aptportrayal.

The instrument that central banks most directly control --the interest rate at which commercial banks lend to each otherovernight -- affects virtually no transactions that most peoplecare about. But expectations about the path of that rate shapelong-term interest rates, which then influence economicactivity. The signal that central banks send about this path ishow they exert leverage over an economy.