Wednesday, February 02, 2005

Ho-Hum: Another FOMC Meeting, Another 25 B.P. Increase in the Fed Funds Rate Target

by Tom Bozzo

To nobody's surprise, the Federal Open Market Committee just raised the federal funds rate target to 2.5% from 2.25%. Let me thank the FOMC for tripling the yield on my money-market fund. The usual oracular statement points toward a continuation of the sequence of incremental increases, as the economy is neither weak enough to stop them nor strong enough to induce more aggressive action.

The treasury bond market hardly budged, with the 10-year note yielding just 4.14% (something like half the late-spring spread over fed funds), suggesting that either:
Careful reflection may show these possibilities not to be mutually exclusive or exhaustive.

Meanwhile, the "I must write words" award (non-blogger edition) goes to Edmund Andrews of the Times, whose story says (as of 2 P.M. CDT):
With today's decision, the Fed has now more than doubled overnight lending rates from their 46-year low of 1 percent eight months ago.
Um, that was the December 14 increase from 2 to 2.25 percent. Perhaps the Times copy editors will get on this case between now and tomorrow morning.

Nope; still there as of 8:11am EST 3 Feb.

And I want to thank the Fed for once again making my 3-month T-Bill buy of just a month ago look like Yet Another Bad Investment Decision.
I've tried and failed to come to terms with the reversal of the Spring's incipient bond market rout. So in the current environment, I actually no longer believe in Good Investment Decisions, just lucky ones.
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