Time for emergency fed funds cut?

[WilliamM]

The current 2 year yield is noticeably lower than the federal funds rate right now.  Does it suggest a need for an emergency cut?  Seems this is being discussed a lot right now; perhaps banks have a lot of loans in the 2 year year range that they like to fund with their demand/savings deposits?  Inverted curve might constrain lending?

If you were Powell: what would you do?

[Joe Leote]

This link to a FRED graph showing year 2006 where two year Treasuries yield less than Fed funds rate in later part of year:

Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity, Quoted on an Investment Basis | FRED | St. Louis Fed

The analysis of Fed operations, given below the graph, was written at a time when the Fed did not pay interest on reserves. However it may still be relevant to your question. I may do some further keyword research on the issue under prevailing conditions.

Joe 

On Thu, Apr 3, 2025 at 1:43 PM WilliamM <meye...@gmail.com> wrote:

The current 2 year yield is noticeably lower than the federal funds rate right now.  Does it suggest a need for an emergency cut?  Seems this is being discussed a lot right now; perhaps banks have a lot of loans in the 2 year year range that they like to fund with their demand/savings deposits?  Inverted curve might constrain lending?

If you were Powell: what would you do?

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