Federal funds rate is not optimal, study warns
Dallas Fed research says transmission to other markets has deteriorated in recent months
The federal funds rate is not the optimal metric for the US central bank to target with its monetary policy, research from the Federal Reserve Bank of Dallas concludes.
The study, published on December 16, says that, relative to other money markets and the US financial system as a whole, the federal funds market is “small both in the volume of transactions and in the number and variety of participating institutions”.
The author, Sam Schulhofer-Wohl, says changes in the rate “may not significantly
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