Attempts to “fine tune” inflation developments on a month-to-month basis are doomed to fail and would only introduce additional unnecessary volatility into the economy. Sixth, monetary policy must be underpinned by a comprehensive analytical framework, which ensures that all information needed to take monetary policy decisions is available to policy makers in a form that supports efficient and timely decision-making.
3 These operations, in turn, influenced the interest rate in the federal funds market, where banks experiencing reserve shortfalls could borrow from banks with excess reserves. Before the onset of the crisis, the volume of reserves was generally small – only about $ billion or so. 4 Thus, even small open market operations could have a significant effect on the federal funds rate.