December 13, 2005 Federal Open Market Committee (FOMC) Press Release
The FOMC decided today to raise its target for the federal funds rate by 25 basis points to 4.25%. The Board of Governors, also, unanimously approved a 25 basis point increase in the discount rate to 5.25%.
NOTE: There is 100 basis points in 1 percentage point.
a) What was the initial federal funds rate and discount rate before the announcement?
Federal funds rate [选择] ["6.25", "6", "5.5", "4.75", "5.75", "4.25", "5", "4", "4.5", "5.25"] %
Discount rate [选择] ["6", "4.5", "5.5", "6.25", "5.25", "5.75", "4.75", "5", "4.25", "4"] %
b) Given that reserves are scarce, what is impact of using an OMO to increase the federal funds rate to 4.25%?
Type OMO [选择] ["Open market purchase", "Open market sale"]
Demand for reserves [选择] ["horizontal portion shifts down", "horizontal portion shifts up", "shifts right", "demand remains unchanged", "shifts left"]
Supply of Reserves [选择] ["vertical portion shifts right", "horizontal portion shifts up", "vertical portion shifts left", "supply remains unchanged", "horizontal portion shifts down"]
b) What is impact of increasing the discount rate to 5.25%?
Demand for reserves [选择] ["horizontal portion shifts up", "horizontal portion shifts down", "shifts right", "demand remains unchanged", "shifts left"]
Supply of Reserves [选择] ["horizontal portion shifts down", "supply remains unchanged", "horizontal portion shifts up", "vertical portion shifts right", "vertical portion shifts left"]
c) Given the banks are holding excess reserves, what could the Fed do to increase the federal funds rate using the non-conventional tools?
Interest rate on bank reserve balances [选择] ["increase", "decrease"]
Interest rate on bank term deposits [选择] ["increase", "decrease"]
Interest rate on overnight reserve repurchase agreements [选择] ["increase", "decrease"]