Always waiting too long

Interest rate data in the graph below. Red and green are 5-year rates. Blue is the Federal Reserve policy rate:

This Graph at FRED: https://fred.stlouisfed.org/graph/?g=1uaVr

Everything fell in March 2020, because of Covid.

The five-year rates were increasing by October 2020. The Federal Funds rate didn't begin to increase until March 2022.

The increase of the five-year rates started decelerating by May of 2022. The Federal Funds rate did not begin to decelerate until December of that year.

The five-year rates started falling after October 2022, and after October 2023, and after April of 2024. The Federal Funds rate did not fall, at all, between March 2020 and September 2024.

The five-year rates were constantly exploring their options: going up a little, testing the water, going down a little, and down a little more, changing their mind and rising, always testing the water. The Federal Funds rate fell to zero and sat there for two years. When it started rising, it rose continuously for a year and a half. And when it peaked, it stayed at the peak rate for a full year.

Sure, the Fed has a different objective than private investors. But when you refuse to change your interest rate decisions for long periods of time, you paint yourself into a corner. And when you finally do decide to change the rate, you suddenly discover you are behind the curve and you need to make oversized changes rather than small, cautious, gentle ones.

It's not like the Fed is new at this. It's like somebody convinced them to create some crazy 9 percent inflation, and follow up with a recession. That's what it's like.