In particular, most private-sector borrowing and investment decisions depend not on the funds rate but on longer-term yields, such as mortgage rates and corporate bond rates, and on the prices of long-lived assets, such as housing and equities. Moreover, the link between these longer-term yields and asset prices and the current setting of the federal funds rate can be quite loose at times.
It is striking, for example, that even as the FOMC has raised its target for the federal funds rate by 75 basis points in its three meetings since June, the yield on ten-year Treasury securities has fallen by almost the same amount during that period.