The Federal Reserve and other central banks manipulate interest rates every day, James Grant of Grant’s Interest Rate Observer told CNBC’s “Closing Bell” on Thursday.
“The Fed is in the business of trying to manipulate markets, the macro economy, interest rates, unemployment and inflation through various monetary means, including the twisting around of yield curves and interest rates,” Grant said.
Grant added, “The Federal Reserve fixes rates on principle. They have ‘operation twist’ that manipulates the credit markets. They have quantitative easing that manipulates bond yields.”
Operation twist refers to the Fed’s program of buying longer-dated bonds to bring down long-term interest rates, while quantitative easingis the purchase of securities to inject money into the economy. (Related: Biggest Holders of U.S. Government Debt).
Commenting on the growing London Interbank Offered Rate fixing scandal, Grant said “the idea that the banks are in charge of manipulating interest rates is absurd. The central banks do it all the time and they do it massively.”
The Liborscandal might get bigger, Grant conceded, but outrage should be directed at the world’s central banks, he said.