Why doesn't the fed adjust rates more often, but in smaller increments?

I'm not well-versed in this theory, but it seems like the fed's choices are often a large, binary event. But doesn't the amount they raise it also affect things? Couldn't they just raise it a tiny amount and make it less about whether they will raise rates, but by how much?

 

That's what they are doing... Moving it .25

 

Just once a year until around 20 years from now we're back at 5%.

 

Ya... Once they have taxed us all to death through dilution... probably not then either...

 

they are going to raise to .75% over 3 years and drop it to 0 in one day when there's a recession...oh and probably below 0 eventually into negative territory....this is what happens when you let the government interfere

 

Instead of doing it once a year, why not do it 5 times at .05 is my question.

 

The actual Fed-funds rate (as versus the target) wobbles by a few bips every day, based on market conditions. Targeting it to 5 bips would be too granular.

 

That is actually realistic.... If you listen to yellen you can tell she deeply believes that not only does the fed have control but that they are meeting their "do no harm" motto... What a joke

 

Actually, it doesn't really "wobble" these days... Only month/qtr/year ends matter, since it's sort of a dying mkt.

Personally, I find the idea that there's so much drama and worry arnd 25bps of hikes absurd. However, I suppose there's something logical about the possibility that they could move in smaller increments. Still, on balance, it's kinda crazy.

 

It would be interesting to see how markets reacted to such a move.