The Fed rate cut? It already happened

Everybody's waiting to see if the Federal Open Market Committee decides to cut interest rates on Tuesday. But as the chart below shows, the Federal funds rate has already more or less cut itself:

I'm not entirely sure what the significance of this is. I imagine it's a function of the guys at the open market desk at the Federal Reserve Bank of New York, whose buying and selling sets the rate, being more interested in keeping markets functioning smoothly than in hitting the rate target set by their bosses at the FOMC right on the nose. Which fits with the argument, first offered by Ben Bernanke in 1983, that in times of crisis central banks should focus as much on averting big "disruptions in the mechanism of credit" as on setting monetary policy.

Then again, it might just be a sneaky rate cut.

The idea for the chart comes from Greg Mankiw (sorry for getting all my ideas today from Mankiw; I won't let it happen again. Although you know, maybe I should write a post on how great it would be if we raised gas taxes ...). A commenter on Mankiw's blog points out that Felix Salmon had it first.

Update: I've got another post on the topic here.