The increase in the supply of reserves topped $ billion by the end of the week. The Funds Rate and Other Market Rates I have discussed at some length how the Federal Reserve manages the federal funds rate, the most direct instrument of monetary policy.
As I have already hinted, however, monetary policy is effective only to the extent that Federal Reserve actions can affect a wide range of interest rates and asset prices. What is the link between the funds rate and these key financial variables? The interest rates most closely linked to the funds rate are those prevailing in short-term money markets.