Target Rate

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Dictionary Says

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 Says

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.

Search results for

'Target Rate '

  • The Federal Reserve: The FOMC Rate Meeting | Investopedia

    http://www.investopedia.com/university/thefed/fed4.asp
    ... Conversely, if it wants to slow down the economy, it will increase the target
    rate. ... If the FOMC reduces the target rate, it buys securities. ...

  • How Interest Rate Cuts Affect Consumers

    http://www.investopedia.com/articles/economics/08/interest-rate-affecting-consumers.asp
    ... Read on to find out. What Is the Rate? When the Fed "cuts rates", this refers to
    a decision by the FOMC to reduce the federal funds target rate. ...

  • The Federal Reserve: Conclusion | Investopedia

    http://www.investopedia.com/university/thefed/fed5.asp
    ... If the target rate has been increased, the FOMC sells securities. If the
    FOMC reduces the target rate, they buy securities. Reducing ...

  • What You Should Know About Inflation

    http://www.investopedia.com/articles/01/021401.asp
    ... The FOMC uses the federal funds target rate as one of its principal tools
    for managing inflation and the pace of economic growth. ...

  • Investing Basics: Flight To Quality

    http://www.investopedia.com/articles/basics/09/flight-to-quality.asp
    ... T-bill interest rates are largely dependent on the federal funds target
    rate. When the Federal Reserve consistently lowered rates ...

  • CFA Level 1 Study Guide - Global Economic Analysis - Fixed vs. ...

    http://www.investopedia.com/exam-guide/cfa-level-1/global-economic-analysis/fixed-pegged-exchange.asp
    ... 11.7 Target Capital Structure; 11.8 Marginal Cost of Capital; 11.9 Factors Affecting
    the ... Period; 11.11 Net Present Value (NPV) and the Internal Rate of Return (IRR ...

  • Using Interest Rate Parity To Trade Forex

    http://www.investopedia.com/articles/forex/08/interes-rate-parity.asp
    ... The Bank of Japan's target rate over that period ranged from 0 to 0.50%; if the
    UIP theory had held, the yen should have appreciated against the US dollar on ...

  • 5 Ways To Rate Your Portfolio Manager

    http://www.investopedia.com/articles/stocks/11/5-ways-to-measure-money-managers.asp
    ... modification. Rather than comparing portfolio returns to the risk-free rate,
    the portfolio's performance is compared to a target return. The ...

  • Get To Know The Major Central Banks

    http://www.investopedia.com/articles/forex/06/CentralBanks.asp
    ... rates. Unlike most other central banks, the SNB determines the interest
    rate band rather than a specific target rate. Like Japan ...

  • CFA Level 1 Study Guide - Corporate Finance - Target Capital ...

    http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/target-capital-structure.asp
    ... 11.7 Target Capital Structure; 11.8 Marginal Cost of Capital; 11.9 Factors Affecting
    the ... Period; 11.11 Net Present Value (NPV) and the Internal Rate of Return (IRR ...

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