FYI: Believe it or not, short-term interest rates are higher today than they were in August, even though the Federal Reserve cut the federal funds rate last week by a quarter-point.
But it’s important not to confuse nominal with real rates. Nor should you ignore taxes. Adjusting for these two factors, an entirely different picture emerges.
Consider the yield on the one-year Treasury — currently at 1.5%. After adjusting for average federal tax rates, and after subtracting the CPI’s most recent 12-month rate of change, this yield translates to a net-net effective interest rate of minus 0.8%. A similar calculation at the end of August yielded a net-net rate of minus 0.9%.
In other words, on an after-tax, after-inflation basis, short-term rates are a tenth of a percentage point higher than they were at the end of the summer.
Regards,
Ted
https://www.marketwatch.com/story/short-term-interest-rates-are-actually-higher-now-than-before-the-last-fed-cut-2019-11-05/print
