Musings on Markets · 2024-09-20
· 622d
Central Banking Myths: Do Federal Reserve Actions Actually Control Interest Rates?
This article challenges common misconceptions about Federal Reserve power, arguing that the Fed only controls the Fed Funds rate—an overnight inter-bank borrowing rate—while consumer and business interest rates are set by markets or institutions. The author analyzes whether Fed rate changes actually lead market interest rates and stock prices, finding that the relationship is more complex than widely assumed.
Metrics in this report
Emergency Fed Meetings (3 decades)
11count
total
Emergency rate changes in response to market crises
Fed Funds Rate Low (Post-2008 Crisis)
~0%
near zero
Post-2008 financial crisis through early 2020
Fed Funds Rate Peak (Volcker Era)
>20%
peak
1979-1982 inflation-fighting period
Historical Time Period Analyzed
249quarters
total
1962-2024 period for rate change analysis
Zero Rate Duration
14years
approximately
Period from 2008 to 2022