(Bloomberg) The key benchmark that the Federal Reserve targets to control monetary policy slipped closer to zero, raising the possibility that the central bank might need to tinker with the tools it uses to control it.
The shift also adds to the debate about policy more broadly, as the glut of cash that’s keeping downward pressure on short-end rates combines with longer-term inflation concerns to fuel talk about just how soon the Fed might need to take its foot off the accelerator.
The effective fed funds rate, which the central bank is currently aiming to keep within a range of 0% to 0.25%, slipped by 1 basis point to 0.05% on May 28, the lowest since April, the Fed said Tuesday. A persistently lower level raises the chance that the bank will tweak the rates it sets for interest on excess reserves and its reverse repurchase agreement facility.
Nothing has been the same since the 2005 housing bubble burst that nearly collapsed the financial system. US Public Debt has risen from less than $8 trillion in mid-2005 to near $30 trillion today.