R/FEDFUNDS.R

In JustinMShea/neverhpfilter: An Alternative to the Hodrick-Prescott Filter

#' Effective Federal Funds Rate
#'
#' \code{FEDFUNDS} All Employees: Total Nonfarm
#'
#' @section Notes:
#'  Averages of daily figures.
#'  
#'  The federal funds rate is the interest rate at which depository institutions 
#'  trade federal funds (balances held at Federal Reserve Banks) with each other 
#'  overnight. When a depository institution has surplus balances in its reserve 
#'  account, it lends to other banks in need of larger balances. In simpler terms, 
#'  a bank with excess cash, which is often referred to as liquidity, will lend 
#'  to another bank that needs to quickly raise liquidity. (1) The rate that the borrowing
#'  institution pays to the lending institution is determined between the
#'  two banks; the weighted average rate for all of these types of 
#'  negotiations is called the effective federal funds rate.(2) The
#'  effective federal funds rate is essentially determined by the market
#'  but is influenced by the Federal Reserve through open market
#'  operations to reach the federal funds rate target.(2)
#'  The Federal Open Market Committee (FOMC) meets eight times a year to
#'  determine the federal funds target rate. As previously stated, this
#'  rate influences the effective federal funds rate through open market
#'  operations or by buying and selling of government bonds (government debt).
#'  (2) More specifically, the Federal Reserve decreases liquidity
#'  by selling government bonds, thereby raising the federal funds rate
#'  because banks have less liquidity to trade with other banks.
#'  Similarly, the Federal Reserve can increase liquidity by buying
#'  government bonds, decreasing the federal funds rate because banks have
#'  excess liquidity for trade. Whether the Federal Reserve wants to buy
#'  or sell bonds depends on the state of the economy. If the FOMC
#'  believes the economy is growing too fast and inflation pressures are
#'  inconsistent with the dual mandate of the Federal Reserve, the
#'  Committee may set a higher federal funds rate target to temper
#'  economic activity. In the opposing scenario, the FOMC may set a lower
#'  federal funds rate target to spur greater economic activity.
#'  Therefore, the FOMC must observe the current state of the economy to
#'  determine the best course of monetary policy that will maximize
#'  economic growth while adhering to the dual mandate set forth by
#'  Congress. In making its monetary policy decisions, the FOMC considers
#'  a wealth of economic data, such as: trends in prices and wages,
#'  employment, consumer spending and income, business investments, and
#'  foreign exchange markets.
#'  
#'  The federal funds rate is the central interest rate in the U.S.
#'  financial market. It influences other interest rates such as the prime
#'  rate, which is the rate banks charge their customers with higher
#'  credit ratings. Additionally, the federal funds rate indirectly
#'  influences longer- term interest rates such as mortgages, loans, and
#'  savings, all of which are very important to consumer wealth and confidence.(2)
#'  
#'  References (1) Federal Reserve Bank of New York. “Federal funds.” Fedpoints,
#'  August 2007. (2) Board of Governors of the Federal Reserve System. “Monetary
#'  Policy”. http://www.federalreserve.gov/monetarypolicy/default.htm.
#'
#'
#' @docType data
#'
#' @usage data(FEDFUNDS)
#'
#' @format An \code{\link{xts}} object of the Fed Funds figures.
#'  \itemize{
#'  \item\strong{Release:} {H.15 Selected Interest Rates}
#'  \item\strong{Seasonal Adjustment:} {Not Seasonally Adjusted}
#'  \item\strong{Frequency:} {Monthly}
#'  \item\strong{Units:} {Percent}
#'  \item\strong{Date Range:} {1954-07-01 to 2021-11-01}
#'  \item\strong{Last Updated} {2021-12-01 3:18 PM CST}
#' }
#'
#' @source Board of Governors of the Federal Reserve System (US) 
#' \url{https://fred.stlouisfed.org/data/FEDFUNDS.txt}
#'
#' @examples
#' data(FEDFUNDS)
#' tail(FEDFUNDS)
#' plot(FEDFUNDS, grid.col = "white", col="green")
"FEDFUNDS"