The last time the Fed Funds target rate got this out of line with the effective rate was in 1987, and from a base of over 6% not 2%. On a percentage basis, at three times the target rate the spread is unprecedented. It happened today.
Fed funds jump to 6 pct in mkt, tripling Fed's target
NEW YORK NEW YORK, Sept 15 (Reuters) - Federal funds traded in the U.S. interbank lending market were indicated to have jumped to 6 percent on Monday, tripling the target rate of 2 percent which the Federal Reserve sets."
WHY WORLD CENTRAL BANKS ARE FLOODING MARKETS WITH FUNDS: since the evidence above is that banks do not trust to borrow from each other (thus the wide LIBOR spread), the central banks are making loan funds available to the commercial banks instead. by Norton
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