Fed’s funds rate falls below its target range on the last day of 2015
The Federal Reserve’s policy rate fell below its target range on the last day of 2015, data released Monday by the central bank show, a development that many traders anticipated but nonetheless renewed concerns about market forces threatening the Fed’s ability to control short-term interest rates.
The daily benchmark, called the effective federal-funds rate, dipped to 0.20% on Dec. 31, below the Fed’s newly set 0.25%-0.5% range for interest rates on overnight loans between banks.
While the fed-funds rate popped back into range one trading session later—settling around 0.35% to 0.37% as of early trading on Monday according to broker ICAP PLC—the drop Thursday was widely watched amid scrutiny of new tools the Fed has designed to keep rates lifted.
It came 2½ weeks after the Fed raised rates for the first time in nearly a decade and was the first sign of swings in the policy rate that Fed watchers had predicted for the year-end.
