The Fed and Interest Rates

As of this writing, the Federal Reserve Open Market Committee has not announced its decision on interest rates. However, Binyamin Applebaum wrote an interesting New York Times article, dated September 12, about how the Fed might go about implementing an increase in interest rates – “The Fed’s Policy Mechanics Retool for a Rise in Interest Rates.” Because of the amount of excess reserves held by banks at the Fed, raising short-term rates is not as simple as in the past. Moreover, market reactions to any announcement and to subsequent Fed actions to implement a decision to raise rates, which will happen at some point, if not today, could prove to be complicating factors.