| Course | FNCE 4102 Financial Institutions and Markets |
|---|---|
| Week | Week 3 |
| Paper type | Policy brief |
| Length | About 540 words, 4 pages |
| Format | APA 7 student paper |
| School | Walden University |
| Program | BS in Business Administration |
| Updated | October 2026 |
Free sample paper for FNCE 4102 Week 3
How the Federal Reserve's March 16, 2022 Rate Increase Traveled From the Policy Rate to Mortgages and Savings Accounts: Four Steps and the Link Most Likely to Break
Student Name
Walden University
FNCE 4102: Financial Institutions and Markets
Instructor Name
Month Day, Year
How the Federal Reserve's March 16, 2022 Rate Increase Traveled From the Policy Rate to Mortgages and Savings Accounts: Four Steps and the Link Most Likely to Break
The Action
At the meeting that ended March 16, 2022, the Fed's rate-setting committee lifted its policy range by a quarter point, "to 1/4 to 1/2 percent," and said it "anticipates that ongoing increases in the target range will be appropriate" (Board of Governors of the Federal Reserve System, 2022). It was the first increase since 2018.
Step 1: The Overnight Market
The effective federal funds rate, the rate banks actually pay one another for overnight reserves, moved from about 0.08 percent before the announcement to about 0.33 percent the next day (Federal Reserve Bank of New York, n.d.). The Fed achieves this by raising the interest it pays on reserve balances, which sets a floor below which banks will not lend overnight. The first link held within one day.
Step 2: The Banks
Banks responded on the lending side almost immediately. The prime rate, which large banks use as a base for many business loans and credit cards, rose from 3.25 to 3.50 percent the next day, matching the full quarter-point increase. On the deposit side, the response was slow. National average savings rates barely moved in the months that followed, because banks were holding large deposit inflows from the pandemic years and had little need to compete for funds. Drechsler et al. (2017) show that deposit rates typically lag policy increases because many banks face little local competition for deposits.
Step 3: Household Borrowing Rates
Credit card rates, tied to prime, rose by the same quarter point within one or two billing cycles. Mortgage rates are different, because they are priced off long-term Treasury yields rather than the overnight rate. The average 30-year fixed mortgage rate in Freddie Mac's weekly survey was about 4.16 percent on March 17, 2022, up from about 3.2 percent at the start of the year (Freddie Mac, n.d.), but most of that rise came before the decision, as markets anticipated a series of increases. Mortgage rates passed 5 percent by mid-April, reflecting expectations of further increases rather than the single March move.
Step 4: Spending and Borrowing Decisions
The intended effect is on behavior: higher borrowing costs should slow home purchases, business investment and credit-financed spending, easing inflation. Home sales slowed through 2022 as mortgage rates climbed toward 7 percent by the autumn. The full effect on inflation works with long and variable lags, so it cannot be traced to one decision. What can be traced is the speed of each earlier link: one day for the overnight market and prime rate, weeks for card rates, months or never for savings rates.
Where the Chain Could Break
The weakest link in March 2022 was the deposit side of Step 2. Because banks did not raise deposit rates, savers gained almost nothing while borrowers paid more. If banks had faced competition for deposits, the policy would have reached savers faster. A second weak point is Step 3 for mortgages: because mortgage rates follow long-term yields, a policy increase that markets doubted would last could leave mortgage rates unchanged, weakening the policy's effect on housing.
References
Board of Governors of the Federal Reserve System. (2022, March 16). Federal Reserve issues FOMC statement [Press release]. https://www.federalreserve.gov/newsevents/pressreleases/monetary20220316a.htm
Drechsler, I., Savov, A., & Schnabl, P. (2017). The deposits channel of monetary policy. The Quarterly Journal of Economics, 132(4), 1819-1876. https://doi.org/10.1093/qje/qjx019
Federal Reserve Bank of New York. (n.d.). Effective federal funds rate. https://www.newyorkfed.org/markets/reference-rates/effr
Freddie Mac. (n.d.). Primary mortgage market survey. https://www.freddiemac.com/pmms
What the FNCE 4102 Week 3 instructions ask for
In Week 3 you trace one monetary policy action through the financial system in a short brief. State the action at the top, quoted from the announcement with its date. Then follow it in numbered steps: the overnight market rate, the banks' lending and deposit rates, household borrowing rates such as cards and mortgages and the intended effect on spending. Give a figure and source for each step and say how quickly it moved. Note where deposit and lending rates diverge. Close with a short paragraph on which link was weakest and what would happen if it failed. Keep it to about two pages.
Inside the FNCE 4102 Week 3 example
The brief quotes the March 16, 2022 statement. Step 1 reports the overnight rate's move the next day, citing the New York Fed, and explains interest on reserves as the floor. Step 2 shows prime rising a full quarter point while deposit rates lagged, citing Drechsler and colleagues on local deposit competition. Step 3 explains why mortgage rates follow long yields, with Freddie Mac's survey showing most of the rise came before the decision and rates passing 5 percent by April. Step 4 describes the intended effect on spending and notes the lags. The final section names deposit pass-through and mortgage pricing as the weak points.
Where the marks sit in the FNCE 4102 Week 3 rubric
Policy briefs are graded on accuracy and on whether each link in the chain is measured. The action should be quoted and dated. Each step needs a figure, a source and a note on speed. Strong briefs distinguish rates that move together with the policy rate from those that follow long-term yields or competition, and they explain why deposit rates often lag. The weakest-link section should identify a specific point of failure and its consequence, not a general caution. Briefs that describe monetary policy in the abstract, without one dated action and measured steps, fall short of the assignment. Accuracy on dates matters: comparing a rate from the day before the decision with one from a month later blurs the speed of each link, which is the main thing the brief is meant to show.
FNCE 4102 Week 3 help: mistakes that cost marks
Choose one decision and find its official statement; copy the exact words describing the action. Then look up the effective federal funds rate on the days before and after. Check the prime rate, a mortgage rate survey and average deposit rates around the same dates. Ask which moved at once, which lagged and which had already moved because markets expected the decision. For the last section, ask which link is least reliable and why. Common errors are describing the theory without numbers and mixing dates. Tell us which decision you are studying, and we can help find the data series. A two-page limit forces the focus onto measured links.
Get a FNCE 4102 Week 3 example written to your instructions
Upload the Week 3 prompt with your rubric and whatever policy action the assignment names, and the brief traces that decision through its own four steps. Free for a first sample, returned within 24-48 hours. The announcement itself is quoted and dated, so every step can be checked against a public record.
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FNCE 4102 Week 3 questions, answered
Where can I find a free FNCE 4102 Week 3 sample paper?
The full policy brief, all four steps and the weak-link section are reproduced here free.
Which decision does the FNCE 4102 Week 3 brief trace?
The Federal Reserve's March 16, 2022 decision to raise the federal funds target range to 1/4 to 1/2 percent.
How quickly did the overnight rate respond?
The effective federal funds rate rose from about 0.08 to 0.33 percent the next day.
Why did mortgage rates move differently?
They follow long-term Treasury yields, which had already risen in anticipation of a series of increases.
Which link was weakest?
Deposit rates, which barely moved because banks held large deposit inflows and faced little competition.