The Dollar and the Federal Funds Rate
Last Updated: 07/14/94
In early February the Federal Open Market Committee announced a tightening of monetary policy; as of June, this has been reflected in a 125basis-point increase in the federal funds rate from 3.0% to 4.25%. In light of this action, recent movements in the dollar against the German mark and Japanese yen seem perplexing. From February 4 to June 30, the dollar depreciated by 9.9% against the mark and 10.2% against the yen.