Question: Go to the FOMC page of the Federal Reserve Board’s website: (http://ww

Question

Question:

Go to the FOMC page of the Federal Reserve Board’s website: (http://www.federalreserve.gov/FOMC/) to find the statement issued after the most recent FOMC meeting.

a. What is the target federal funds rate?

b. Is the target federal funds rate different from the target federal funds rate in the previous FOMC statement? If yes, by home much does it differ?

c. Does the statement comment on current macroeconomic conditions in the United States? How does it describe the U.S. economy?

d. Find the discount rate. What is it? (Wall Street Journal is a source)

Explanation / Answer

(a) The most recent meeting of FOMC has held on April 26-27, 2016. In this meeting FOMC has kept the target federal funds rate at 1/4 to 1/2 percent.

(b) No, the target federal funds rate was not different from the target federal funds rate at the previous FOMC statement. In previous FOMC statement (meeting held on March 16-17, 2016), the target federal funds rate was same that is at 1/4 to 1/2 percent.

(c) Yes, the statement, indeed, comment on current macroeconomic conditions in the United States. According to the statement, there is slowdown in the growth of ecnomic activity in United States. However, conditions in the labor market has improved somewhat. Consumer sentiment has also improved with real income of household is increasing at solid rate but spending of household is still growing at moderate pace. Inflation is under control and labor market is emitting signs of strenghtening.

(d) Discount rate is 1 percent. Discount rate is the minimum interest rate that Federal Reserve charges while lending to commercial banks and other depository institutions.

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