brewer12345
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Mar 6, 2003
- Messages
- 18,085
P.S. How are CD rates set in the first place? I
would imagine it is some weenie pouring
over the same data that is used to measure
current CPI and projecting in the future. Do
you mistrust TIPS as well? Those rates are
priced by auction with an implicit assumption
about future CPI made by the aggregate.
Hahahahah! Not even lose, my friend. CD rates are set by each individual bank offering them, based on how badly the bank needs funds at each maturity bucket, what the market requires, and (to put it bluntly) exactly how lazy and inattentive their customers are.
Banks as a whole may well follow CPI, but more likely the CD rate is related to the rate on the assets the banks are buying with the funds spits out. Asset rates in turn are related to treasury rates and risk premia. Treasury rates are strongly influenced by inflation expectations. So in a rather circumspect way, CD rates are likely related to CPI, but its probably a reationship with a fair amount of noise.