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At its meetings on March 3 and March 15, 2020, the Fed reduced its target for the federal funds rate—the cost for banks to borrow money from one another overnight—by a combined 1.5 percentage points. Due to these reductions, the funding rate is now between 0% and 0.25%.
What were Taylor's recommended interest rates, and what are Federal Reserve Set Interests?
The federal funds rate, which the Federal Reserve sets as a major interest rate, is what banks charge one another for very short-term loans. The Federal Reserve decreased the federal funds rate's target range from 1% to 0%.
As a central bank, the Federal Reserve works to accomplish three objectives set forth by Congress: maximum employment, price stability, and moderate long-term interest rates in the United States.
The Taylor Rule establishes a connection between inflation and economic growth and the policy rate of a central bank. It was developed in 1993 by economist John Taylor and is based on a federal funds rate equilibrium that is 2% higher than the annual rate of inflation.
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