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?