Thomas L. HoganAmerican Institute for Economic ResearchThe Federal Open Market Committee (FOMC) met this week to decide the stance of the Federal Reserve’s monetary policy. In its official statement, the committee chose to maintain its effective federal funds rate target in the range of zero to 0.25% and ongoing open market purchases of $120 billion per month.The Fed did, however, have an important change listed in its Implementation Note. It raised the interest rates that the Fed pays to banks and other financial institutions. How should consumers and investors interpret this change in Fed policy?The Fed’s monetary policy toolsUp to 2008, the Fed conducted monetary policy through open market operations, the buying and selling of short-term Treasury bonds. In 2008,
