Long Term Chart of Federal Funds Rate

by: Babak

Here’s a chart of +50 years of the intended Federal Funds rate:

Now is an appropriate time to take a step back and look at the bigger picture because what the Fed has just done is extremely rare.

It has reduced the interest rate by more than 43% in less than 6 months. To find such a frantic slashing of rates we’d have to go back to the Volcker years in the early 1980’s.

The only other time in recent history that is remotely similar is the aftermath of the 9/11 tragedy in late 2001.

What makes it intriguing is that unlike the 1980’s and 2001 when everyone knew something horrible had gone wrong, we don’t really have that now. I think it will take some time for us to understand just what happened.

It seems surreal now as we are going through it. Perhaps the only way to understand it is through the perspective of time. Who would have believed that the current credit crunch makes the 1998 crisis pale in comparison?