This is the Cato Daily Podcast for Monday, October 28th, 2024.

I'm Caleb Brown.

The relationship between the Federal Reserve Fed Funds Rate and observed interest rates throughout the economy is strained to say the very least.

It is J. Kettius says it's a problem with clear implications for monetary policy and Fed authority going forward.

We spoke last week.

Something that bugs me and I was heartened to hear in a discussion here with you as I was passing through the offices

rolling around costing various scholars and demanding detailed explanation of what they're working on.

And I stopped by your office, and the thing that bugs me, and I'm so happy to hear you say this,

whenever I hear the financial press say, say the Fed is lowering interest rates

say the Fed is lowering interest rates or the Fed is going to hike

interest rates, that is shorthand, that strictly speaking simply is not correct.

I completely agree with that. I mean if you listen to the discussion in the media about this,

they don't actually say the Fed lowered the federal funds rate, which is their policy rate which they can control.

Some careful journalists will, but often that is not the case.

In fact, in the, so I have a blog article that accompanies sort of this podcast if people are

interested and in that I make a couple of examples of media articles

that do this. But most often you'll hear a journalist say something like, the Fed is lowering

borrowing rates or the cost of borrowing.

And that presumably assumes that when the Fed lowers the federal funds rate,

that somehow has an immediate effect

across debt across the country and will immediately change the

debt conditions of most consumers.

...