Michael,
I have a naive question, not really understanding how Fed funds work, and their implications.
The Fed has been adding reserves almost daily for the past few months. According to Henry Volquardsen on the Currency thread, the Fed's adding and draining reserves to hit the Fed funds target are usually short-term, technical adjustments, and don't mean much.
However, according to Jim Hopkins of the Kahuna thread (he's not a currency specialist, though Henry is), he's seen an uncanny correlation between the Fed's adding reserves and the market's performance that day (oh, I guess I should be more precise, the big index stocks <g>).
So, what does it mean that the Fed has been injecting reserves almost daily? And, what does it mean when despite the Fed's adding reserves, the Fed funds rate is more than 50 basis points above their target? How does all this machinery work?
Peter |
