If given a healthy dose of truth serum, here's what I think she really means: "I have no idea why rates haven't gone up. We've been hoping and praying for years that rates would rise, but they never seem to. We plan to keep hoping and praying. Obviously, we have no ready mechanism to raise rates. Just saying "go up rates" doesn't make it so and, as everyone knows, open market sales to reduce reserves could easily be destabilizing." Okay, I got that.
The Fed has the power to add to and subtract from the monetary base. Outside of that, the only other power the Fed has is to badger big banks to bend to their will when they feel in the mood to badger. But, one power the Fed does not have is the power to precisely control interest rates. That they cannot do. The past five years is pretty demonstrative evidence.
Paul Volcker, the greatest Fed Chairman in history in my view, always said that "we are just following the market," at the time the Fed announced a new target range for the Federal Funds rate. Volcker understood what was going on and, I suspect, Yellen does as well.
But, it is so much easier to believe that the Wizard behind the curtain controls all of this than to accept the reality that markets control rates, not the Wizard. So, look for more Fed speak nonsense. Rates will rise when markets make them rise....not before.
0 Nhận Xét