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Article: Targeting the fed funds rate. (federal funds market)
- Article from:
- Futures (Cedar Falls, IA)
- Article date:
- November 1, 1991
- Author:
CopyrightCOPYRIGHT 1991 Summit Business Media. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Targeting the Fed funds rate
Traders of Chicago Board of Trade 30-day interest rate futures watch policy actions by the U.S. Federal Reserve Board to gauge credit pressures because the contract is priced on one of the Fed's policy instruments, the Fed funds rate. But it's not clear the policies are as traders perceive them.
It seems either the Fed misses its policy targets or analysts keep underestimating the targets. The market consensus on the Fed's target for the overnight "Fed funds rate" runs consistently below the actual rates.
Recall that the overnight Fed funds rate is the rate at which banks borrow excess reserves from each other for one ...