The Actual Fed Funds Rate Is Now Below .25%

The Fed used to do a much better job of actually targeting its Fed Funds target, see chart above (click to enlarge) showing data since late January 2008 when the Fed lowered its target from 3.5% to 3% (data here).

The blue line is the Fed Funds target and the red line is the actual Fed Funds rate. When the Fed lowered the target to 1.5%, the actual Fed Fund rate was closer to 1%, and now that the target is 1%, the actual Fed Funds rate has been below .25% for the last five days (through Tuesday of this week).

Comments

[investor88:]

Thanks for clarifying target FF rate of 1% and actual FF of just 0.25%. Some explanation of actual FF would be useful for the general reader like myself, and maybe the implications of a lower actual FF compared to target.

We do know credit is tight yet actual FF is so low, how do we reconcile?.

2008 Nov 07 07:34 PM