Trying to Teach Old Dogs New Tricks

September 23, 2016 Monika Greenhow

On Wednesday, the Federal Reserve's open market committee concluded its two-day meeting to set U.S. monetary policy. In a vote that divided the Board of Governors, appointed by the president and confirmed by the U.S. Senate in an open public process, and the presidents of the regional bank board presidents, chosen by boards dominated by banks within their region, Janet Yellen, chair of the Federal Reserve Board of Governors and the FOMC, announced the FOMC decided to hold steady to its current fed funds rate. The fed funds rate is an overnight interest charge made between banks loaning reserves to each other. If it is higher, the cost of making loans goes up, and that reduces liquidity for the business and consumer sectors. Lower liquidity means less borrowing for business investment or consumer purchases like homes and cars. In turn, that means slower demand, and translates into slower growth for jobs.

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