Sure....agencies of our government, Fannie Mae, Freddie Mac, Fed Home Loan Banks, some others, are generally considered bullet-proof AAA credits because, although the Federal Govt does NOT EXPLICITLY guarantee their creditworthiness with "the full faith and credit of the United States," markets have agreed for years that the US has a moral obligation to make good on these agency financial obligations and IMPLICTLY guarantees them. (Aside: Ginnie Mae - GNMA - is one agency that IS specifically backed by the full faith and credit of the US.) Anyhow....in my opinion, and I'm rather certain in the opinion of some major institutions, ANY downgrade from AAA, which suggests there is even a remote chance FHLB will be unable to service obligations, is extraordinary and troubling news. If this institution is stressed, it's likely a sign that the credit difficulties working their way through our financial system are far from over. Under such circumstances, raising rates "to fight inflation" might well exacerbate the credit difficulties and extend our economy's low-growth-no-growth-negative growth period. (Further aside: commodity price inflation is particularly difficult for central bankers to deal with. All they can do is restrain credit growth / slow the economy. Until they can pump extra crude oil or grow more corn and soybeans, their ability to impact commodity inflation is indirect at best.
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