If you look back at how the Fed changed the target rate, you will find lots of very small changes. They usually move much slower than many would like. They don’t want to destabilize the system by encouraging everyone to move at once. If you view rate cuts as the gas and rate hikes as the brakes, how would you like to be driven around? Stomping on the brakes and gas is rough ride and slow steady pressure is a much smoother ride. Corny analogy but you get the point.
There is the difference comparing now to then. Volker made some drastic cuts and hikes to try to control the situation quickly. Greenspan moves like a turtle for the most part. Also, he never says anything that can be understood by the press or mainstream america. This makes it difficult for the masses to overreact to anything the Fed does like they did when Volker tightened credit controls. Some call it “Greenspan Speak.” You can’t react to what you don’t understand.
