Questions tagged [fed-funds-rate]

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Fed balance sheet changes - USTS vs MBS

This week's Fed balance sheet report This week the balance sheet increased by 3 billion. U.S. Treasury securities (USTS) decreased by 12 billion. Mortage-backed securities (MBS) increased by 16 ...
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How does the Fed ensure the realised overnight interbank lending right stays within the Fed Funds Rate band?

I am trying to understand how the target FFR set by the FOMC is actually realised in the overnight lending market. That is, by what mechanism does the market driven overnight lending rate converge to ...
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Inflation vs fed hike

If inflation continues to grow at the pace at which it’s growing won’t the inflation itself put the economy in slowdown. Why does FED have to proactively intervene to slowdown?
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Why do reserves increase when the Fed buys bonds? (Introduction to Macroeconomics)

A question asks, "If the federal funds rate were above the rate the Fed had targeted, the fed could move the rate back towards its target by _" and then the options are buying/selling bonds, ...
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Are low rates a subsidy to banks?

Axel Leijonhfvud (Professor Emeritus, Department of Economics, UCLA) wrote in 2011: The Fed is supplying the banks with reserves at a near-zero rate. Not much results in bank lending to business, but ...
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Are major banks in US necessarily going to benefit from the rise of federal fund rates?

https://wtvbam.com/2022/01/05/fed-funds-futures-see-rate-hike-in-march-after-minutes-of-policy-meeting/ It is believed that Fed is very likely to raise the Federal Fund rates in the next a couple of ...
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Forward Guidance affects interest rate?

Forward guidance affects the effective federal funds rate, right? as opposed to the overnight reverse repurchase/overnight loans, longer-term interest rates, or discount rate of loans from the Fed to ...
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Does FED's change in short-interest rates impact long term rates?

Through changing the federal fund rate(short-term), does this empirically impact the longer end of the curve? If so, what is the logic or transmission mechanism that caused the change?
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Credit risk of interest rate on excess reserves vs fed funds rate?

I noticed that the interest rate on excess reserves and the fed funds rate are almost exactly the same at all times. Why is this the case? Shouldn't the credit risk of a bank be higher than the ...
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Why is the prime rate typically 3% higher than the fed funds rate?

What is the right framework to think about the prime rate in relation to the fed funds rate? Idea 1: A bank is safer to lend to than even trustworthy institutions so there's a premium on prime rates. ...
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