IntroductionCoca Cola, like any other company, deals with the effects of monetary policy set by the Federal Reserve Bank of the United States. The three tools the Federal Reserve uses to control monetary policy are the discount rate (federal funds rate), open market operations (buying and selling bonds), and the reserve rate requirement. The following will discuss the monetary policy tools used by the Federal Reserve Bank and their effects on The Coca Cola Company and other businesses. Federal Funds Rate By definition, the federal funds rate is the interest rate at which private depository institutions (primarily banks) lend balances. (federal funds) to the Federal Reserve to other depository institutions, usually overnight. Changing the target rate is a form of open market operations that the Chairman of the Federal Reserve uses to regulate the U.S. money supply in the U.S. economy. Short-term interest rates remained relatively stable during the first half of the funds' financial year. However, around the middle of the second half, short-term rates began to fall a bit as concerns about the strength of the housing and credit markets as well as the current economy led the Federal Reserve to cut rates in the short term. The Federal Reserve cut the federal funds rate by 25 basis points (0.25%) and injected $41 billion in short-term reserves into the markets. On a daily basis, most businesses operate independently of the federal rate and are completely independent of it. Coca-Cola sells Coca-Cola by the truckload, regardless of the fallout from scarce federal funds. In addition, it generated considerable amounts of excess cash that allowed it to virtually manage the interest rates that the banks imposed on it. The Coca-Cola Company reports earnings per share of $1.77 for the year, up from $1.23 the year before. Furthermore, operating cash flow increased by 15% to 5.5 billion. Added to this are earnings per share of $0.38 in the fourth quarter and global unit case volume growth of 3% in the fourth quarter and 4% for the full year. Opinions on whether the Federal Reserve will raise interest rates in the future abound, with conventional wisdom siding with a rate increase. However, the decision probably won't affect stock price movements as much as it would with surprise corporate earnings announcements. With a benchmark rate of 1.5%, rates remain quite low – past economic recoveries have seen rates at 3% or higher at this point..