Transcription of Interest Rate Targets and Operating Regimes
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Interest Rate Targets and Operating Regimes
Authorized for public release by the FOMC Secretariat on 1/14/2022. October 14, 2016. Interest Rate Targets and Operating Regimes 1. 1. Executive Summary This memo reviews two key components of most monetary policy implementation frameworks the Interest rate(s) (IR) that the Federal Reserve may wish to use as a policy rate and the Operating regime (OR) it chooses to promote money market rate conditions consistent with the target policy rate. 2 Policymakers can achieve the long-run framework objectives through many alternative IRs and ORs. However, policymakers' choices with regard to these two key framework features have important implications. In particular, these choices determine the need for and use of particular tools that constitute a monetary policy implementation framework. 3. We start the discussion by reviewing how various frameworks operate in normal times. We examine the necessity and effectiveness of various tools, including ceilings, floors, reserve requirements, and discretionary open market operations (OMOs).
Oct 14, 2016 · transmitted effectively to longer-term interest rates and overall financial conditions, allowing monetary policy to influence activity in the real economy. 8. As a result, policymakers can choose from a range of policy rates and meet key objectives of a MPI framework. Of course, achieving interest rate control relies on using appropriate operating
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