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Federal Reserve System (FED) Interest Rates

Category: Intermarket analysis | 4 Aug 2011 | No comments »

US Federal Reserve System (shortly FED) impact US economy basically by two interest rates: discount rate (primary credit rate) and fed funds rate. FED directly settles discount rate but fed funds rate it can influence indirectly through operations in the open money market. It works in the following way: commercial banks are obliged to hold a certain part of  the money held by society onto their accounts and if a bank do not have enough liquidity it can borrow some excess of reserves from another bank. This is a fed funds trade. (more…)

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