Federal Fund Rate's too low The tangent line to the Federal Fund Rate of the past two debt cycles has only one tangent point to the curve identifiable in geometrical terms to 1974 12.90% Federal Fund rate.
To be clear what anyone can draw in geometrical terms as a tangent line to a curve, in math terms can be defined as the first derivative of the curve in that specific point.
The fact that the last two decades Federal Fund rate curve have the same tangent line, i.e. the same derivative, as the 1974 Federal Fund rate, that only in visual terms can explain how misplaced are money markets interest rates
and how dangerously far out the curve the Federal Fund rate has been squashed and compressed down.
Taking into consideration the high Inflationary CPI and PPI data consistent for more than one year, and the considerable disruptions and shortages in all sorts of commodities and supply chains, the Stagflationary economic environment of 1974 could be easily replicated and repeated, with the only caveat that the Federal Reserve has increased of 25 basis points the Federal Fund Rate to 0.25%, thereby a lot more CPI and PPI Inflation are going to characterize the economy in the near term or years.
