We target only the overnight rate, and traders and investors, such as those represented and serviced by those here this evening, determine longer-term interest rates on Treasury and private securities. The resulting structure of rates and spreads in the fixed-income markets can in turn be a valuable tool that we can use when analyzing the current state of macroeconomic conditions and forecasting the future.
Clearly, however, the roles of the fixed-income markets and the Federal Reserve are complementary, not identical. Your role is to allocate scarce savings among competing demands. Ours is to set overall conditions, particularly by maintaining price stability, that allow market prices to accurately reflect supply and demand dynamics.