1

After the Fed announces its new target range for Fed Funds, is there a set number of days before actual implementation?

If not, is there a convention, like within a week?

I'm wondering, because the Fed announced the new range of 3.00-3.25% on September 21, but as of end-of-day, September 22, the Treasury shows a 1M T-Bill rate of 2.73%, indicating that the new range hasn't been implemented yet.

1
  • 1
    The new target Fed funds rate is effective immediately. Treasury yields are driven by market dynamics, the Fed doesn't set them.
    – 0xFEE1DEAD
    Sep 23, 2022 at 15:45

1 Answer 1

1

Fed announces its new target range for Fed Funds...

...I'm wondering, because the Fed announced the new range of 3.00-3.25% on September 21, but as of end-of-day, September 22, the Treasury shows a 1M T-Bill rate of 2.73%, indicating that the new range hasn't been implemented yet.

They don't set the rate for T-Bills.

From their Implementation Note issued September 21, 2022

The Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate paid on reserve balances to 3.15 percent, effective September 22, 2022.

Banks are required to have funds held in reserve. When one bank is a little short, and another has some excess reserves, this the rate that the funds are borrowed.

Effective Federal Funds Rate

The federal funds market consists of domestic unsecured borrowings in U.S. dollars by depository institutions from other depository institutions and certain other entities, primarily government-sponsored enterprises.

T-bills and the like aren't set by the federal reserve. They are set via auction.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .