Dec
16
| Preparing for the Rate Hike | |
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We will almost surely see the U.S. Federal Reserve Board start the long process of ending its intrusion into the interest rate markets, by allowing rates to rise starting on Wednesday. It will be the first time the Fed has raised rates since 2006, and for some it will mark the beginning of the final chapter of the Great Recession.
Since 2008, as most of us know, returns on short-term bonds have been at or near zero percent, which is a consequence of the Fed keeping the Federal Funds rate—the rate at which it will lend banks virtually unlimited amounts of money, short-term—at 0.125%. The average Fed Funds rate has historically been 3.5% to 4.0%, so this is a considerable amount of stimulus.
At the same time, the Fed has purchased more... |
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