Question

Describe how Federal Reserve monetary policy actions influence market interest rates

Short answer

Federal Reserve monetary policy actions influence market interest rates by setting discount rates, opening market operations, and setting reserve requirements.

Step-by-step solution

introduction

The monetary policy implies the moves made by the Federal Reserve in regards to value dependability, work and moderate long haul loan fees.

explanation

1. Setting reserve requirements implies indicating how many actual assets that banks should hold for possible later use against their store record and it additionally decides the most extreme sum that the banks can raise through advances and speculations.

2. Open market operations allude to trading the US government protections in the monetary market to impact the degree of stores in the financial framework. The degree of stores will impact the loan fees.

3. Setting the discount rate and financing cost are paid by the bank on momentary advances from Federal Reserve Bank. These rates are typically lower than the government finances rate.