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Old Yesterday, 04:06 PM
 
7,279 posts, read 8,112,371 times
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Quote:
Originally Posted by James Bond 007 View Post
I don't agree that in the mid-late 90's the Fed fell behind. Here's the history of the Federal Funds Rate:
https://fred.stlouisfed.org/series/FEDFUNDS
After the 1990 recession ended, the Fed began aggressively raising rates in 1994, with a lag after the recession ended (which is typical of their actions). They then basically flat-lined the rate at just over 5% for 4 years. There was a brief lowering in 1998 in response to the Asian currency crisis. Then in 1999 and 2000 they started raising it aggressively then.

Especially given that the lowest FFR after the 1990 recession was around 3% - which would be considered very high nowadays - I would say the Fed was *more* restrictive then than they have been in the past 10 years. And as a result of that, if anything, they were *restricting* growth more then than they are now.
If a ~2.5% eFFR move in a matter of weeks does not indicate to you that the Fed. was behind/realized it was behind the inflation curve I can't help you.
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Old Yesterday, 04:34 PM
 
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They lowered the overnight rates after March 1995. Greenspan tried one interest rate increase in 1997 and backed off due to the Asian currency crisis.

https://fred.stlouisfed.org/series/DISCOUNT

https://www.thebalance.com/fed-funds...s-lows-3306135

reasons: Orange Co bankruptcy from interest rate derivatives, Mexican Peso economic crisis due to NAFTA, persistent Japanese recession despite a series of fiscal stimuli, and timing of Japan's Kobe earthquake (March 1995). Both Mexico and Japan were dependent on exports to the US. The way out would be to stimulate demand for imports in the US, while a strong dollar would keep down inflation.
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Old Yesterday, 05:13 PM
 
Location: Kansas City, MISSOURI
5,473 posts, read 1,647,100 times
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Quote:
Originally Posted by EDS_ View Post
If a ~2.5% eFFR move in a matter of weeks does not indicate to you that the Fed. was behind/realized it was behind the inflation curve I can't help you.
If you looked at the link I posted, you'd notice there was not anything particularly unusual about the steepness of the rise in the FFR of the late 90's.

There was a similarly steep rise in 1994-95.

There was a similarly steep rise in 2004-2006.

There was also a very steep one in 1984. And in 88-89.

And also in the 70's and before.

What's even worse about your argument is that inflation in the late 90's wasn't any different than it is now:
https://fred.stlouisfed.org/series/CPIAUCSL#0
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