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> One interest rate is set by the Fed, which serves as a benchmark for other market rates. This used to be true, but lately CBs are also buying bonds. That aff
by lordnacho 7y ago
> One interest rate is set by the Fed, which serves as a benchmark for other market rates.
This used to be true, but lately CBs are also buying bonds. That affects their supply/demand balance, which affects their price, which is another way of expressing the interest rate.
Source: spent time trading bonds.
- aguyfromnb 7y ago>but lately CBs are also buying bonds. Monetary policy, and the setting of rates, is accomplished by the buying and selling of bonds in the open market by the Fed. They buy bonds and create money, or sell them to destroy it. This affects the amount of money "available" in the system, which affects interest rates. Of course, this transmission mechanism isn't perfect.