Federal Funds Rate The Federal Funds Rate is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity. The rate that the borrowing institution pays to the lending institution is determined between the two banks; the weighted average rate for all of these types of negotiations is called the effective federal funds rate. The effective Federal Funds Rate is essentially determined by the market but is influenced by the Federal Reserve through open market operations to reach the Federal Funds Rate target. Inflation Rate Inflation Rate is calculated as the change in Consumer Price Index over time presented as a percentage change Growth of Wages Growth of W ages is the change in wages represented as a percentage as calculated by the U.S. Bureau of Labor Statistics. Real Gross Domestic Product (GDP) Real Gross Domestic product (GDP) is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year. Put simply, real GDP measures the total economic output of a country and is adjusted for changes in price. Yield Curve A Yield Curve is a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates. The slope of the yield curve gives an idea of future interest rate changes and economic activity. There are three main shapes of yield curves: normal (upward sloping curves), inverted (downward sloping curves), and flat. While normal curves generally point to economic expansion, downward sloping (inverted) curves often predict economic recession in the coming 12 months.
18 ARG Quarterly Barometer Q2 2023
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