The Most Important Number in Investing
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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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