Final answer:
To move the federal funds rate towards its target, if it's below the desired level, the Federal Reserve would sell bonds to decrease the supply of reserves, causing an increase in the federal funds rate.
Step-by-step explanation:
If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by selling bonds to reduce the supply of reserves in the banking system. This action would increase the federal funds rate because banks would have fewer reserves to lend to one another, thus they would charge each other higher interest rates to borrow these reserves overnight. It is a part of the central bank's monetary policy to adjust the availability and cost of money to help guide the economy. The Federal Open Market Committee (FOMC) sets a specific target or target range for the federal funds rate during its regular meetings. To control inflation or stimulate economic growth, the Fed uses such open market operations to influence short-term interest rates and, by extension, long-term rates and other financial conditions.