Fed funds rate fails to capture policy stance

Eric Rosengren, the president of the Boston Federal Reserve, has noted that the federal funds rate cannot be seen as a fair reflection of the Fed's monetary policy stance in times of stress.

"During a credit crunch, various constraints on the supply of credit will make market rates less responsive to a lower federal funds rate," Rosengren said. "While the Federal Reserve essentially sets the federal funds rate (the rate at which banks will lend to each other), it does so with the intention of

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