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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: John Madarasz who wrote (61427)1/25/2001 9:16:59 AM
From: GraceZ  Read Replies (1) of 436258
 
at this stage in the game, so close to a fed meeting, have any interpretative value re: interest rates?

Notice that the size of the RPs keeps getting larger and larger. They are making these large infusions to defend the rate that they set, because loan demand is high, the rate is rising above their target. In not allowing the market to determine the proper rate (who the hell knows what the "proper" rate is?) they are missing the information that the market is giving them on the price of money. Putting money in the system at a lower rate than the market would have it go tends to bring in more demand.....and when the demand rises it puts upward pressure on rates. It's a vicious cycle.
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