Via our Top News Stories Column – From Zerohedge.com: “The Paint May Be Drying, But The Wall Is About To Crumble”: BofA Explains What The Market Is Missing

The Fed’s traditional monetary policy tool is to set the ‘Fed’s Funds rate.’ The Fed Funds rate is the overnight rate at which banks borrow reserves to stay compliant with reserve requirements, but in a world where banks have $2.1 trillion in excess reserves, there is little need to borrow reserves. Thus the Fed Funds rate has become largely irrelevant. It exists mostly as a data entry in some Fed database. One must therefore wonder why the Fed has spent so much energy preparing the market for these rate hikes. Objectively it has had little impact on tightening liquidity. Perhaps the Fed is more interested in raising the related Interest on Excess Reserves Rate (IORR) and doesn’t want to admit it.