Industrial Insight

interest rates…. | April 20, 2011

At the moment, the target federal funds rate is set at 0-0.25 per cent, but the Fed also has about $1,600bn in extra long-term assets on its balance sheet, with more to come before the end of QE2.

A Fed rule of thumb is that buying an extra $200bn of assets is the same as taking 25 basis points off the funds rate. That means current interest rates are, in effect, about minus 2 per cent.


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