Is This Why the Fed is Raising Rates???

Econimica:



As the Fed is in the midst of a rate hike cycle, it seems important to remember why this cycle is like no previous rate hike cycle.  The mechanics of this hiking cycle are completely unique and experimental...thus the outcome is far more of an unknown than "normal".

Why?  In a typical cycle, the Fed would sell a relatively small portion of its assets...er, balance sheet (typically short duration bills and notes) to banks.  This would withdraw some of banks liquid funds (replacing them with less liquid assets) and create "tightness".  This tightness would push overnight lending rates higher and the daisy chain of rising rates would work its way through from the shortest eventually all the way to the 30yr Treasury bonds.

Cont....