Search results
Results from the WOW.Com Content Network
In contrast to the usual inflation rate targeting, Laurence M. Ball proposed targeting long-run inflation using a monetary conditions index. [60] In his proposal, the monetary conditions index is a weighted average of the interest rate and exchange rate. It will be easy to put many other things into this monetary conditions index.
The inflation rate was high and increasing, while interest rates were kept low. [6] Since the mid-1970s monetary targets have been used in many countries as a means to target inflation. [7] However, in the 2000s the actual interest rate in advanced economies, notably in the US, was kept below the value suggested by the Taylor rule. [8]
This interest rate target is usually reviewed on a monthly or quarterly basis by a policy committee. [19] Changes to the interest rate target are made in response to various market indicators in an attempt to forecast economic trends and in so doing keep the market on track towards achieving the defined inflation target.
A so-called "zero interest-rate policy" (ZIRP) is a very low—near-zero—central bank target interest rate. At this zero lower bound the central bank faces difficulties with conventional monetary policy, because it is generally believed that market interest rates cannot realistically be pushed down into negative territory.
The target federal funds rate is a target interest rate that is set by the FOMC for implementing U.S. monetary policies. The (effective) federal funds rate is achieved through open market operations at the Domestic Trading Desk at the Federal Reserve Bank of New York which deals primarily in domestic securities (U.S. Treasury and federal ...
The FOMC left rates unchanged the day after the Bankruptcy of Lehman Brothers. Official Statement: August 5, 2008 2.00% 2.25% 10–1 The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent. Official statement: April 30, 2008 2.00% 2.25% 8–2 The FOMC cut rates by 25 basis points.
The rate targeting alternative, which targets a constant growth rate per period allows growth to drift lower or higher over time than implied by straightforward compound growth, because each period's target growth depends on the nominal income in the prior only.
The interest rate channel posits that an increase in the short-term nominal interest rate leads first to an increase in longer-term nominal interest rates. This is described by the expectation hypothesis of the term structure. In turn, this affects the real interest rate and the cost of capital, because prices are assumed to be sticky in the ...