Target Rate
Definition of 'Target Rate 'The interest rate charged by one depository institution on an overnight sale of balances at the Federal Reserve to another depository institution, as determined by the Federal Open Market Committee (FOMC) of the Federal Reserve.The 12 members who comprise the Federal Open Market Committee meet for eight regularly scheduled meetings per year. During these meetings, the FOMC reviews economic and financial conditions and determines the federal funds target rate. A decline in the target rate could stimulate economic growth; however, too much economic activity can cause inflation pressures to build. A rise in the rate limits economic growth and helps control inflation pressures; however, too great an increase can stall economic growth. The FOMC seeks a target rate that will achieve the maximum rate of economic growth. |
|
Investopedia explains 'Target Rate 'The FOMC may schedule additional meetings as necessary to implement changes in the target federal funds rate. At any of the FOMC's meetings, the federal funds target rate may increase, decrease or remain unchanged depending on the economic conditions in the United States. A change in the federal funds rate can affect other short-term interest rates, longer-term interest rates, foreign exchange rates, stock prices, the amount of money and credit in the economy, employment and the prices of goods and services.The Federal Reserve Act of 1913 charged the Federal Reserve with setting monetary policy to influence the availability and cost of money and credit. |
Related Definitions
Articles Of Interest
-
How Interest Rate Cuts Affect Consumers
Traders rejoice when the Fed drops the rate, but is it good news for all? Find out here. -
Introduction To Coincident And Lagging Economic Indicators
Investors can learn a lot, or very little, from these indicators once they know how to use them. -
How Risk Free Is The Risk-Free Rate Of Return?
This rate is rarely questioned - unless the economy falls into disarray. -
Top 4 Most Scandalous Insider Trading Debacles
Here we look at some of the landmark incidents of insider trading. -
Nobel Winners Are Economic Prizes
Before you try to profit from their theories, you should learn about the creators themselves. -
Open Market Operations Explained
The term “open market operations” refers to a monetary policy tool in which central banks buy and sell bonds to regulate the money supply in the economy. The United States employs open market ... -
The Copper King: An Empire Built On Manipulation
Find out how Yasuo Hamanaka's actions in the copper market forever changed the rules for commodity traders. -
The Basics Of The T-Bill
The U.S. government has two primary methods of raising capital. One is by taxing individuals, businesses, trusts and estates; and the other is by issuing fixed-income securities that are backed ... -
7 Controversial Investing Theories
We take a closer look at the theories that attempt to explain and influence the market. -
Forces Behind Interest Rates
Get a deeper understanding of the importance of interest rates and what makes them change.
Free Annual Reports