tag:blogger.com,1999:blog-2499715909956774229.post3315857248577656313..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: On the Road to NormalStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2499715909956774229.post-29069487689589506382015-12-23T14:00:43.194-08:002015-12-23T14:00:43.194-08:00"Why did the Fed bother with an ON-RRP facili..."Why did the Fed bother with an ON-RRP facility? It could have simply changed its target rate to IOR (very easy to hit) and then started its rate hike cycle. The fed funds rate would have been dragged up behind IOR, kicking and screaming. Did the Fed want something prettier than that?"<br /><br />Sure, it may have worked out like that. But there may have been doubts about what would happen to the margin between IOER and the ff rate as IOER increases. This way you make sure.<br /><br />"Or why not just let the GSEs earn interest?"<br /><br />That's for Congress to decide. But I've never heard an explanation for why the law was written this way.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-28226965313160977932015-12-23T10:45:42.011-08:002015-12-23T10:45:42.011-08:00Interesting stuff, Steve. Very well explained.
Wh...Interesting stuff, Steve. Very well explained.<br /><br />Why did the Fed bother with an ON-RRP facility? It could have simply changed its target rate to IOR (very easy to hit) and then started its rate hike cycle. The fed funds rate would have been dragged up behind IOR, kicking and screaming. Did the Fed want something prettier than that?<br /><br />Or why not just let the GSEs earn interest? That would have fixed the leak so that a sub floor wasn't needed. What is so sacrosanct about non-payment of interest to GSEs?JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.com