During the March meeting, the Fed decided to raise the federal funds rate. How does raising the federal funds rate impact on prices of assets such as bonds and stocks in the financial market? Explain the details.

 

(2) The FOMC meeting statement mentioned that the Fed will reduce its holdings of Treasuries and mortgage-backed securities. Is this an example of expansionary monetary policy or a contractionary monetary policy? How will the asset reducing program affect the market interest rate? Explain the reasons.