/24-7PressRelease/ - REDONDO BEACH, CA, August 28, 2008 - Jesse Torres' Fed School (fed-school.jessetorres.com) today announced the release of this week's Fed School tutorial: Federal Funds Rate Target Changes and the Financial Markets.
The Federal Funds Target Rate is of critical importance to the Federal Reserve because it is through the Federal Funds Target Rate that the Federal Reserve implements its monetary policy. While the Federal Reserve does not directly become involved in Federal Funds (Fed Funds) transactions, it plays a role through the use of repurchase agreements and reverse repurchase agreements purchased and sold by the Trading Desk at the Federal Reserve Bank of New York. The use of repos and reverse repos enables the Federal Reserve to effectively influence the Fed Funds rate. This week's Fed School tutorial focuses on the financial market's response to announced changes by the Federal Reserve to the Federal Funds Target Rate.
It is generally accepted that a change by the Federal Reserve in the Federal Funds Target Rate is treated as a change in the Federal Reserve's monetary policy. While this comes as no surprise, what is fascinating about the Federal Funds Target Rate is that the financial markets respond not only to actual changes but also to expected or perceived changes - a concept referred to as Open Mouth Operations.
This week's Fed School (fed-school.jessetorres.com) covers Federal Funds Target Rate and Monetary Policy, Federal Funds Rate Changes Based on Target Rate Changes, Real and Inflation Components of Interest Rates, Expectations Theory of the Term Structure of Interest Rates and the Segmented Markets Hypothesis.
Jesse Torres' Fed School (fed-school.jessetorres.com) is a free resource created to share practical information on the mystical dealings of the Federal Reserve and its monetary policy. Fed School provides tutorials on the dealings of the Fed to allow those interested to gain a better perspective. This site is not for professional economists but it is for financial professionals and others with an interest in learning how the Federal Reserve affects our businesses and every day lives.
About Jesse Torres' Fed School
Jesse Torres' Fed School (fed-school.jessetorres.com) is a free resource created to share practical information on the mystical dealings of the Federal Reserve and its monetary policy. Fed School provides tutorials on the dealings of the Fed to allow those interested to gain a better perspective. This site is not for professional economists but it is for financial professionals and others with an interest in learning how the Federal Reserve affects our businesses and every day lives.
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