The Traderszone Network

Published in TZ Latest News 12 June, 2014 by The TZ Newswire Staff

Interest rates and monetary policy

Commenter Fed up asked the following question:

Start at IOR = 0% and fed funds rate = 8%.

Next, move to IOR = 2% and fed funds rate = 6%.

What happens?

If you have an interest rate-oriented view of monetary policy then this must be a bit of a head scratcher.  Higher IOR is “raising interest rates” and a lower fed funds rate is “lowering interest rates.” So which is it?

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