The FOMC releases a statement directly after each meeting. Find the statement fo

Question

The FOMC releases a statement directly after each meeting. Find the statement for the Oct/Nov 31-1 meeting and answer the following: https://www.federalreserve.gov/

1. Define the federal funds rate.

2. What is the target rate for the federal funds rate?

3. The Federal Reserve must determine the state of the economy when it comes to deciding on appropriate monetary policy. Unfortunately, there is not one single statistic which would reflect the overall state of the economy. The FOMC must consider many different variables. Find three separate variables that the committee considered.

4. How many members voted for this monetary policy action and how many against?

Explanation / Answer

1.
Federal funds rate is the rate at which the Federal Reserve lends funds to the other banks. Banks always need funds to meet their contingent requirements. In this case, the Federal Reserve acts as the banker of the bank and issue funds to the bank at a rate that is called as Federal funds rate.

2.
Target rate for the Federal fund rate is 1% to 1.25% as decided by the FOMC (Federal Open Market Committee) at Federal Reserve.

3.
Committee considered three different variables as follows:
A.   Inflation rate
B.   Labor market condition and employment
C.   International financial and economic developments

4.
There were 9 members, including the chairman Janet L. Yellen and all members voted unanimously for the monetary policy initiatives. There was no any voting against the decisions taken in this policy update.

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