Fed acts to enforce benchmark target

The Federal Reserve has moved to correct the disparity between its federal funds target and actual rates by raising the amount of interest paid on excess reserves held at the central bank.

As Central Bank News reported on 30 October, the effective federal funds rate, which represents the cost at which the central bank wants banks to lend overnight, has veered wildly from the Fed's target since the 8 October rate cut. Such a divergence is unprecedented and raises the issue of whether Federal O