Fed Funds Rate -- Gathering of The Clan

The FOMC has gathered to review the Fed Funds Rate target, which is now 3.0%. I am no fan of rate targeting, and have spent little time over the years trying to divine what the FOMC will do from meeting to meeting. The cyclical case for higher short term interest rates remains in place, so the Fed would be well within its rights to raise the the FFR target tomorrow if it so elects. The consensus says the FFR will be lifted to 3.25% (If I was Uncle Al, in the late twilight of my career and with cool porch sitting evenings at Jackson Hole beckoning, I would raise the FFR to 3.5% and call off the next FOMC meeting, tentatively set for August in sultry D.C.).

To further restore its integrity, the Fed should stop ripping off depositors and establish a FFR which supports deposit rates that offer a real return to individuals after adjusting for both inflation and taxes. Last year, when the FFR was a lowly 1.0%, folks lost less on savings by stuffing cash into the cookie jar than by depositing it at a bank. The situation is better now, but there is still a fair way to go.

The leading edge of the mighty boomer generation turns 60 over the next twelve months. As time passes, they are going to desire more of a savings cushion to protect against life's little shocks and hazards. It would nice to see the deposit structure accomodate them.