What is the likely response from the Fed if the market federal funds rate equals the target rate?

When the market federal funds rate equals the target rate set by the Federal Reserve (the Fed), it indicates that the monetary policy is effectively balanced. In this situation, the Fed typically does not need to take any action to influence the rate because it is currently aligned with its goals.

Selling U.S. Treasury securities is a contractionary monetary policy action that would usually be undertaken if the federal funds rate were above the target rate, as it would reduce the reserves in the banking system and push the market rate higher. However, if the market rate equals the target rate, the Fed would not take this step.

Therefore, while selling U.S. Treasury securities is a strategy associated with tightening monetary policy, in the situation where the market rate is exactly at the target, the Fed would likely maintain its current operations rather than selling securities. Their focus would typically be on ensuring that the market rate stays aligned with economic conditions without requiring drastic adjustments like selling securities.