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Originally posted by OBE1
The Fed sets the Fed Funds Rate (overnight rate) , and controls this "target rate" via open market operations ....while the bond market is said to control the term structure/yield curve. Imo , to state that the bond market sets interest rates [independent of the Fed] is kind of a misnomer...simply , the bond market is constantly reacting to Fed policy at the short end. Thus the power of the Fed to influence interest rates across the curve.