PERC Blog

A January FOMC Post-Mortem

Posted: January 29, 2020 by Dennis W. Jansen, Thomas R. Saving
Media coverage the day following the Federal Reserve Open Market Committee’s (FOMC) action on January 29, 2020 widely applauded the Fed’s decision to maintain its target for the Fed Funds rate.  But the most important aspect of the December meeting was the decision to increase the interest paid on bank reserves, the IOER, from 1...

Interest Rates and Fed Policy in 2019

Posted: January 27, 2020 by Dennis W. Jansen, Thomas R. Saving
The year 2019 was a year of declining market interest rates. In fact, 10-year Treasuries fell from 2.8% in January to a low of 1.47 in early September, during the period of the interest rate inversion. At that point, 3-month Treasuries were yielding almost 2%. The inversion ended in early October but the 3-month, 1-year and 10-year rates were al...

The Fed and Interest Rates: Where to Now?

Posted: October 25, 2019 by Dennis W. Jansen, Thomas R. Saving
Since September, when the Federal Reserve reduced the top of the target range for the Fed Funds rate from 2.25% to 2.00%, a reduction 25 basis points, and reduced the interest rate paid on bank reserve balances from 2.1% to 1.8%, a cut of 30 basis points, market interest rates have continued to fall. As a result, the interest rate paid to banks ...

A September FOMC Post-Mortem

Posted: September 20, 2019 by Dennis W. Jansen, Thomas R. Saving
Media coverage on the day following the Federal Reserve Open Market Committee’s (FOMC) action, as announced on September 18, widely applauded the Fed’s lowering of its target for the Fed Funds Rate.  The most important change in the September meeting was reducing the interest paid on bank reserves, the IOER, by 30 basis points. ...

The Fed and Interest Rates: Where Do We Go From Here?

Posted: September 13, 2019 by Dennis W. Jansen, Thomas R. Saving
As market interest rates continue their downward slide, the press is awash with predictions of how much the Fed will reduce interest rates at its September 17 and 18 meeting. The very fact that market interest rates are changing without Fed action begs the question of whether the Fed can even influence the direction of change in market interest ...

FOMC July 31: A Post-Mortem

Posted: August 05, 2019 by Dennis W. Jansen, Thomas R. Saving
On July 31 the Fed announced a 25 basis point cut in both its target band for the federal funds rate and in its rate of interest on excess reserves (IOER).  The new IOER would be 2.15%.  Media coverage widely parroted the statement that the Fed had lowered interest rates for the first time since the onset of the Great Recession.  ...

FOMC July 30-31: Ten Reasons to Cut Rates

Posted: July 29, 2019 by Dennis W. Jansen, Thomas R. Saving
Speculation is running high regarding whether the Federal Open Market Committee (FOMC) will cut interest rates – either the Federal Funds Rate upper bound or more importantly, the interest rate on reserves– at its next meeting scheduled for July 30 and 31.  Opinions are split on what the FOMC should do, and what they will do.&nb...

FOMC June 18: A Post-Mortem

Posted: June 25, 2019 by Dennis W. Jansen, Thomas R. Saving
Media coverage of the Federal Reserve Open Market Committee’s action on June 18 reported that the Fed left interest rates unchanged, with the Federal Funds Rate range holding steady at 2.25% -2.5%.  Unremarked upon by the financial media, and unmentioned in the lead section of the Fed's statement, was the fact that the Fed’s...

The Fed Must Reduce Rates Now!

Posted: June 11, 2019 by Dennis W. Jansen, Thomas R. Saving
The FOMC’s press release from its May 1 meeting emphasized that the economy was on an even keel, and that no change in the Fed Funds Rate target was in store. This steady-as-you-go decision was highlighted in the popular press. Hardly noticed was the small 5 basis point reduction in the interest rate on excess reserves, IOER, despite the f...