Frankly, the market should set short terms rates
The Fed sets only its own interest rate, the rate it charges banks. What do you suppose will happen if the Fed sets that rate higher than market? Banks needing money will get it somewhere else... London perhaps, or Dubai. The world is full of money. If the Fed sets the rate lower than market, the banks will borrow all of it and lend it out somewhere else. There is very little room for price fixing in a world where capital crosses borders at the speed of light. |
That is true. The Fed should not be setting short term rates. The market setting them would be banks.