I will then discuss the effects of changes in the federal funds rate on the asset prices and yields that matter the most for economic activity and inflation.2  Monetary Policy and the Federal Funds Rate Broadly speaking, the Federal Open Market Committee's principal task is to determine the degree of financial stimulus needed to steer the economy onto a desirable path and then to set monetary policy so as to provide that amount of stimulus.
"Financial stimulus" is not a precisely measured concept, but in general, financial conditions are stimulative to the extent that the asset prices and yields prevailing in financial markets induce households and firms to spend more freely.