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9min chapter
The Most Important Number in Investing
Many Happy Returns
Understanding the Federal Reserve's Policy Interest Rate
This chapter explores why the Federal Reserve sets its policy interest rate as a target range and the factors that determine the rate. It discusses the concept of the Fed Fund's rate, the effective calculation of the rate, and the mechanisms used to maintain a lower bound for non-bank financial institutions. The chapter also covers reserve requirements, overnight lending between banks, the discount window, and changes in the management of the effective federal funds rate.
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