Yesterday I posted a chart comparing the intended Federal funds rate set by the Federal Open Market Committee with the actual average interest rate that U.S. banks are charging each other for overnight loans. Since early August, the actual rate has been substantially lower than the intended one. It turned out CondeNast Portfolio blogger Felix Salmon had already posted just such a chart while ago (here’s his updated version), so in the interest of actually moving the discussion (chartussion?) forward, I put this together (and Time.com’s Feilding Cage made it look good):
LIBOR is the London Interbank Offered Rate, the rate that banks in London charge each other for loans of various (short) durations and the benchmark used in many an adjustable-rate-mortgage. There are Euro and sterling LIBORs; in this case, I use the rate for overnight loans denominated in dollars. It usually tracks the Federal funds rate very closely, but it has spent the last month or so bouncing around well above it, although it appears to be returning to normalcy of late. I’m not well enough versed in the vagaries of interbank lending to tell you exactly what all this means, other than that the efforts of the Fed to calm things down took a while to make themselves felt outside the ten block radius of 33 Liberty Street. Any other ideas?