Movements in the federal funds rate have important implications for the loan and investment policies of all financial institutions, especially for commercial bank decisions concerning loans to businesses, individuals, and foreign institutions. Financial managers compare the federal funds rate with yields on other investments before choosing the combinations of maturities of financial assets in which they will invest or the term over which they will borrow. Interest rates paid on other short-term financial securities -- commercial paper and Treasury bills, for example -- often move up or down roughly in parallel with the funds rate. Yields on long-term assets -- corporate bonds and Treasury notes, for example -- are determined in part by expectations for the federal funds rate in the future.

Source: Federal Reserve Bank of New York

"The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. In contrast, the probability, though minor, of an unwelcome substantial fall in inflation exceeds that of a pickup in inflation from its already low level. On balance, the Committee believes that the latter concern is likely to predominate for the foreseeable future."