A policy target range, its midpoint and an observed rate
A policy target range is a pair of boundaries.
Do not collapse different rate concepts
A policy target range is a pair of boundaries. Its midpoint is a calculated summary, while an observed market rate is a separate statistic. Federal Reserve explanations distinguish a federal-funds target range from the mechanisms and market rates associated with implementation. The midpoint should not be presented as a directly observed borrowing quote.
A hypothetical target band shifts from 3.00–3.25% to 3.25–3.50%. The midpoint rises 25 basis points; a separate 3.34% observation is not the midpoint. These are not current policy rates.
Open full-size diagram ↗Calculate an invented range change
Suppose an illustrative range moves from 3.00–3.25% to 3.25–3.50%. Its midpoint moves from 3.125% to 3.375%, a change of 0.25 percentage points or 25 basis points. The range width remains 0.25 percentage points. Adding the two boundaries without dividing by two would produce 6.25% for the original range, which is not a meaningful midpoint.
Worked example: Old midpoint %: 3.125; New midpoint %: 3.375; Observed example %: 3.34. Invented values; units follow the row labels and article.
Open full-size diagram ↗Keep an observed rate on its own row
If a hypothetical observed overnight rate is 3.34% during the second range, record 3.34% as the observation and 3.375% as the midpoint. The difference is −0.035 percentage points, or −3.5 basis points. This is only a comparison of stated numbers; it does not explain policy transmission or diagnose the functioning of a market.
Calculation checklist: Range-width change: Zero; Midpoint change: 25 basis points; Observed minus midpoint: −3.5 basis points. Preserve these definitions when reproducing the example.
Open full-size diagram ↗Preserve dates and definitions
Record announcement date, effective date, rate tenor, range boundaries and the source of any observed series. Do not use these invented levels as current policy information. A target rate is not the rate a particular retail customer will necessarily receive or pay, and no currency-price prediction follows mechanically from this worksheet.
Sources and conventions
Examples are hypothetical. Worked examples state their formulas and assumptions in the article; our methodology explains the related calculators. Broker contract specifications determine actual lot, margin and execution conditions. These sources document definitions and data; a source link does not imply endorsement of SanForex or a trading service.
These materials are prepared with AI assistance and checked against worked examples and deterministic calculation tests where applicable. They are not an expert suitability assessment or investment advice.
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