FED does not have absolute control over interest rates, if markets decide not to buy US Treasuries, there is very little FED could do to force the issue. When I said "interest rates" I referred to US Treasuries interest rates, not FED-controlled inter-banking interest rate. These are related but not the same.

US Treasuries dictate cost of borrowing, and probably the only reliable indicator of what markets think about state of the economy. Currently US Treasuries rate is below inflation levels, meaning people are willing to lose money to hold these. Meaning markets think it is extremely unlikely that US will meaningfully default (all shenanigans with US congress have very little to do with getting paid in grand scheme of things) and that there is very real possibility of deflation as a result of on-going deleveraging.

In contrast - PIGS Treasuries rates are through the roof. Last time I checked they were in double digits. This is how market signals no-confidence.

As to rating agency - anyone can open one and start issuing ratings. Some ratings mean more than others, but at the end all of them are financial equivalent to punditry.

Last edited by sinij; 09/25/12 08:20 AM.
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