Economics: Fed Funds Rate Vs Inflation

The Federal Reserve uses the fed funds target rate to implement monetary policy, raising the rate to curb inflation and cutting it to stimulate economic growth. The chart shows the Fed is having difficulty keeping the actual effective rate in line with its target, suggesting a half-point cut at next week’s FOMC meeting is likely.

Aggressive Fed cuts have taken its target rate down to 1.5%, well below the official 4.9% inflation rate. Interest rates approaching zero and hundreds of billions of bailout dollars flying off the printing presses at the Treasury have only one implication… higher INFLATION is coming.