Word: feds
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Dates: during 2000-2009
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...Analysts in Japan say the U.S. faces a similar situation today. The Fed's recent rate cut "is better than doing nothing, but it will unlikely work so much as it did in the past," says Masaaki Kanno, chief economist at JPMorgan Securities in Tokyo. Hiromichi Shirakawa, chief economist at Credit Suisse in Tokyo, believes that the Fed may bring its rates down to zero by the middle of 2009, as the U.S. economy slows in coming quarters. "Will it be effective or stimulative? My answer is not necessarily so," he says...
...what news was there in today's announcement? Well, nobody dissented, for one thing. The five interest-rate cuts in the first half of this year all came in the face of no votes, as a hawkish minority on the Federal Open Market Committee (FOMC) worried that Fed Chairman Ben Bernanke risked setting off an inflationary spiral. Now everyone at the Fed seems to have come around to Bernanke's Great Depression-influenced view that it's a deflationary spiral that we really need to be worried about...
...Federal Reserve announced Wednesday afternoon that it was lowering its target short-term interest rate to 1%. Big deal. Almost everybody was already expecting the half-point rate cut that the Fed delivered, and the actual federal-funds rate (as opposed to the target rate) has mostly been below 1% for the past three weeks anyway. The stock market's reaction? A yawn, as the Dow closed down 74 points...
...rate cuts, which would bring us into uncharted territory. The federal-funds target rate previously bottomed out at 1% from June 2003 to June 2004. The actual federal-funds rate did drop below 1% a few times in the 1950s, but that was another era - an era when the Fed didn't announce interest-rate targets, banks completely dominated the financial system and the U.S. completely dominated the global economy, and there was no such thing as a money-market fund...
...federal-funds target rate were cut to 0.75%, many money-market funds that invest exclusively in government debt would struggle to cover their costs and still pay a positive return to investors. The Fed has a new facility in the works, the Money Market Investor Funding Facility, that's intended to ease these pressures. Once that's up and running, don't be surprised if short-term interest rates keep dropping, even to 0% - as was the case in Japan from 1999 to 2006. The Fed would literally be giving money away...