Fears of Fed’s Main Rate Dropping Too Low Starts to Lift
- Strategists see adjustments to IOER, RRP rates as unlikely
- Effective fed funds rate has set at 0.07% since Feb. 18
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The rate that the Federal Reserve targets to control monetary policy is defying the skeptics by holding firmly above zero, prompting a rethink from those who thought the central bank might need to step in and tinker with the front end.
While rates on repurchase agreements and other short-term markets have gone negative at times amid the current influx of dollars from the shrinkage of the huge U.S. Treasury cash pile, the effective fed funds rate has held steady at 0.07% since Feb. 18. That’s toward the lower end of the Fed’s target range of 0 to 0.25%, but without a further decline observers are now doubtful that the Fed will act.