ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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is the target interest rate set by the Board of Governors.
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is the target interest rate set by New York Federal Reserve President.
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the target interest rate set by the FOMC.
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the target interest rate set by the Securities Exchange desk.
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Detailed explanation-1: -The federal funds rate is the target interest rate set by the FOMC. This is the rate at which commercial banks borrow and lend their excess reserves to each other overnight. The FOMC sets a target federal funds rate eight times a year, based on prevailing economic conditions.
Detailed explanation-2: -The Federal Open Markets Committee (FOMC) sets the federal funds rate-also known as the federal funds target rate or the fed funds rate-to guide overnight lending among U.S. banks. It’s set as a range between an upper and lower limit. The federal funds rate is currently 4.50% to 4.75%.
Detailed explanation-3: -The Federal Open Market Committee establishes the target rate, or range, for trading in the federal funds market.
Detailed explanation-4: -When the Fed wants to increase the federal funds rate, it does the reverse open-market operation of selling government securities to the banks. The federal funds rate is the major tool that the Fed uses to conduct monetary policy in the United States.
Detailed explanation-5: -This key interest rate impacts how much commercial banks charge each other for short-term loans. A higher fed funds rate means more expensive borrowing costs, which can reduce demand among banks and other financial institutions to borrow money.