Final answer:
The specific interest rate the Federal Reserve targets is the federal funds rate, not the Long-term Treasury bond rate. The federal funds rate is influenced by the Federal Reserve through open market operations. Long-term Treasury bond rates are determined by the market.
Step-by-step explanation:
The specific interest rate the Federal Reserve targets is the federal funds rate, not the Long-term Treasury bond rate. The federal funds rate is the interest rate at which one bank lends funds to another bank overnight. It is an important tool used by the Federal Reserve to control the money supply and influence the overall economy.
The Federal Reserve sets a specific target or target range for the federal funds rate at its meetings. When the Fed wants to lower the federal funds rate, it buys bonds through open market operations. When it wants to raise the federal funds rate, it sells bonds. By adjusting the federal funds rate, the Federal Reserve can encourage or discourage borrowing and spending, which ultimately affects interest rates throughout the economy.
Long-term Treasury bond rates, on the other hand, are influenced by factors such as inflation expectations, investor demand, and economic conditions. These rates are determined by the market and are not directly controlled by the Federal Reserve.