Bank of America: The federal funds rate will rise, lagging behind other money market rates

Bank of America strategists Mark Cabana and Katie Craig stated in a report that due to the "continued rise" in the money market, the discount note prices of the Federal Home Loan Banks have decreased, and the effective federal funds rate will ultimately rise within the Federal Reserve's target range. They wrote that the federal funds rate lags behind other money market rates because of the "long-standing flexible lending relationships between FHLBs and foreign banks," with FHLBs often providing more loans when foreign banks need them. "FHLBs may only raise the federal funds level when they are confident that the costs of their discount notes have been permanently transferred."