Fed’s Mission to Control Benchmark Rate May Spur Another Tweak
- Drop in effective funds rate may lead to a change to IOER
- Change would be in opposite direction to previous adjustments
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The benchmark interest rate that the Federal Reserve focuses on controlling to implement monetary policy has moved closer to the lower bound of its target range, increasing the prospect that the central bank will adjust one of its associated tools later this month.
The effective fed funds rate has been moving lower relative to the band since the Fed embarked on a series of repurchase-agreement operations and Treasury-bill buying to quell funding-market turmoil. Upheaval in September briefly saw fed funds rise above the upper bound of the range, but the measures to make more cash available over the turn of the year helped bring it down.