Which of the following statements regarding the FOMC is NOT correct?

The statement that the Fed can target both the quantity of reserves and the federal funds rate simultaneously is not accurate. The Federal Reserve operates under a framework where it can prioritize one objective over the other, generally focusing on controlling the federal funds rate. When the Fed sets a target for the federal funds rate, it adjusts the supply of reserves in the banking system to achieve that rate. Conversely, if it decides to target the quantity of reserves, the federal funds rate will be determined by the market dynamics based on banks' supply and demand for reserves.

This dual targeting presents a fundamental conflict, as a fixed quantity of reserves could lead to fluctuations in the federal funds rate, hindering the effectiveness of monetary policy aimed at stabilizing rates. Thus, the operational reality of the FOMC is that it typically can’t effectively target both simultaneously without creating imbalances and instability in the money market. The other statements accurately describe the relationship between reserve demand, the federal funds rate, and the targeting practices of the FOMC.