The Federal Reserve has more than one way to work its will on the economy. It could soon start using its more subtle tools to start nudging rates down. That still would have a real impact on businesses and households. The central bank most directly controls short-term rates by setting a target range for the federal-funds rate, the rate at which banks lend money to one another overnight. On Wednesday it left this target unchanged while saying that Fed policymakers on average expect to cut this rate range just once this year, down from an expectation of three times in March. But there are a plethora of other rates that economic players charge each other across the economy, all of which can be indirectly influenced by expectations for what the Fed is likely to do, both in the near term and further out. The Fed can, and frequently does, sway these rates by communicating its future intentions, even without taking action on the fed-funds rate.
Source: WSJ.com: Markets
