Uploaded September 2024 | Updated September 2026, 1 week ago
In the aftermath of the Fed's decision to lower the Fed Funds rate by half a percent on September 16, 2024, I looked at widely held myths about the Fed (and central banks, in general) - that they set interest rates (they don't), that they are market leaders (they are followers), that they send signals to investors and businesses (they do, but they are murky) and that they are stock market whisperers (not true). I use the data on Fed Funds rates, interest rates and stock prices to make my case, but the bottom line is that the Fed's power comes from the perception that it has power, rather than its capacity to move markets.
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/FedDelusions.pdf
Blog Post: aswathdamodaran.blogspot.com/2024/09/fed-up-with-fed-talk-central-banks.html
Data on Fed Funds rates, interest rates and stock prices: https://pages.stern.nyu.edu/~adamodar/pc/blog/FedIntRates.xlsx
In the aftermath of the Fed's decision to lower the Fed Funds rate by half a percent on September 16, 2024, I looked at widely held myths about the Fed (and central banks, in general) - that they set interest rates (they don't), that they are market leaders (they are followers), that they send signals to investors and businesses (they do, but they are murky) and that they are stock market whisperers (not true). I use the data on Fed Funds rates, interest rates and stock prices to make my case, but the bottom line is that the Fed's power comes from the perception that it has power, rather than its capacity to move markets.
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/FedDelusions.pdf
Blog Post: aswathdamodaran.blogspot.com/2024/09/fed-up-with-fed-talk-central-banks.html
Data on Fed Funds rates, interest rates and stock prices: https://pages.stern.nyu.edu/~adamodar/pc/blog/FedIntRates.xlsx
