Questions tagged [federal-reserve]

Use only for questions that are directly related to the central bank of the United States, the "Fed". For example, US monetary policy, US money supply, US balance sheet, etc. Do not use for generic questions related to central banks, monetary policy or other, which are not directly related to the Fed. Use instead central-banking, monetary-policy, or related tags.

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54 views

Why do interest rates move together?

Why do interest rates (mortgage, LIBOR, Treasury yields, etc.) move together? What is the fundamental reason behind that? From my understanding, what drives it is the Federal Funds Rate, which is the ...
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Why the historically narrow asset class purchases from QE

Let's begin by mapping out some context by assuming the following goals of implementing QE: prevent dire systemic liquidity concerns reach inflation targets manage expectations in the private sector ...
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212 views

How did the Federal Reserve determine 3.5T USD in assets?

The financial media have reported that... In general, Fed officials appear to have converged to a minimum balance sheet of roughly $3.5 trillion, which means the runoff would end in the second ...
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70 views

Why's Bernie Sanders wrong to allege that JP Morgan received more than $390 billion in financial assistance from the Fed?

This r/badeconomics post avouches: [JP Morgan] received more than $390 billion in financial assistance from the Fed. Sanders has repeated this lie for several years. He gets the \$...
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Q: Unit root testing: Effective Federal Funds Rate series exhibits autocorrelation

I am conducting a Dickey-Fuller unit root test on the FEDFUNDS series from the FRED database. My estimation period is quarterly from 1955(1) to 2007(4) (taking the average of the monthly rates within ...
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35 views

Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase?

Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase? I understand that to increase the money supply, the ...
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Central bank rate hikes and credit demand

Can someone help me unpack the quoted statement below? Trying to understand how the supply of credit influences the fed raising rates. I guess, why do rates rise or fall in conjunction if the fed ...
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33 views

Does the Federal Reserve have bank accounts for banks?

Banks are constantly transferring electronic dollars to each other. There must be an entity that tracks how many digital dollars each bank has. Does the Federal Reserve have "accounts" for banks? In ...
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439 views

How do central banks earn profit?

I thought of Central banks as the regulators of financial markets. But surplus reserves of some Central banks surpass giant corporate companies. Please explain me how do they manage to make profit in ...
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100 views

Why doesn't the central bank extend loans directly?

I've been thinking about the credit theory of money lately and how it creates money. Since Banks look for sufficient reserves after extending a loan, and since the central bank always loans out money ...
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Difference between “Level” and “Flow” in the Z.1 Fed data

The Z.1 Fed data can be found in FRED. I notices that many similar data sets are labelled "Flow" or "Level". For example, Financial business; total liabilities, Flow Federal government; total ...
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Where the money from QE goes

So when QE is used (or something similar that results in printing mone), where does the newly created money go? Does some entity get free money? Why is that allowed?
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US unemployment data release date

Using the CSV file provided by St. Louis Fed (which is based on the data series LNS14000000 from the Bureau of Labor Statistics) I noticed that the date is always the first day of each month for the ...
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40 views

Did the Nixon shock cause skyrocketing real estate prices in the US?

Ca. 1970 the prices of real estate started skyrocketing in the US: Real estate prices chart. Same with gold: Gold prices chart. So my conclusion is that real estate did not increase in value, it was ...
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Why are required reserves so trivially low?

We know that required reserves are the reserves that central bank requires banks to hold in reserves. Reserves= Required Reserves +Excess reserves. But I see that in 2017 Total Reserves (RESBALNS) = ...
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112 views

Why did the Dollar weaken after interest rate increase?

Yesterday the Fed increased the interest rate of the Dollar yet it's value decreased against various currencies (Source). According to this article it should be the other way around : In economic ...
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50 views

How does national debt work?

I'm trying to understand national debt. I gather that the United States, and other nations with central banks, accrue debt basically by printing new money at their central bank. This, I hypothesize, ...
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In quantitative tightening do banks have no choice in refusing to buy bonds from Central Banks (mainly Federal Reserve)

In light of the recent unease about interest rate rise, I've been taking a growing interest in how our economy actually works, something I've been trying to avoid. So this forum is a way for me to ...
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144 views

The Fed pays 1.50% interest on reserves; so why are interest rates so low?

Since 14th Dec 2017, the Federal Reserve Bank has paid 1.50% interest on excess reserves. So why do depositors' interest rates still remain so low? According to BankRate, across the US, the ...
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579 views

how is new money actually introduced in the United States?

I'm aware that the fed controls the supply of money by contracting and expanding through permanent and temporary open market operations. Consisting of purchasing Treasury securities or through repos. ...
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110 views

Dynamic factor model for inflation (UIG)

I'm trying to replicate some results of Fed Underlying Inflation Gauge (UIG) model, which is a dynamic factor model to capture inflation trend. https://www.newyorkfed.org/research/policy/underlying-...
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459 views

Can the Fed control the shape of the entire yield curve?

Is it often taught that the Fed can only affect the short end of the (Treasury) yield curve, while the long end is governed by investors' inflation expectations. Could the Fed in principle control the ...
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68 views

Considering how USD enters the market, is the USD actually unbacked? Could the USD represent a unit of a “fund” of securities held by the Fed?

From my understanding, all new money enters the market either 1) by the Fed lending it to banks, so the Fed essentially owns bonds in the exchange, or, 2) The Fed purchasing other financial assets. So ...
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186 views

What happens when a reserve bank runs out of foreign currency reserve?

What happens to a country when a reserve bank runs out of foreign currency reserve?
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Does Fannie Mae get money from the FED

Does Fannie Mae directly or indirectly get money that is printed from the federal reserve to buy mortgages, or have they ever? If so, when has this happened? How much money? What is the process by ...
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25 views

Does the separation of FinCEN, and The Federal Reserve protect the integrity of a representative democracy? [closed]

From my understanding, FinCEN is controlled or heavily influenced by the UN. In addition, The Federal Reserve is not a governmental body, yet it has appointees from the current administration. I'm ...
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How does the Fed predict Economic Growth?

Which factors or formulas are used by the Fed to predict Economic Growth?
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51 views

The Fed has a $4.5 trillion balance sheet: where did they get that money?

Who paid for that $4.5 trillion balance sheet? https://www.cnbc.com/2017/09/19/hedge-fund-titan-ray-dalio-says-to-succeed-in-markets-you-need-to-bet-against-the-consensus--and-be-right.html
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Is the Federal Reserve issuing money in a fair way?

Basic logic says that, once a central bank is issuing new money for increasing the money supply, the money should be distributed fairly between all the citizens, and that means giving them all an ...
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3answers
81 views

How much physical currency does the Fed transfer to banks per year?

I just wonder since money has to enter the system somehow. Currently the Fed will supply whatever banks ask to meet their capital needs. But how much physical currency does the Fed, treasury, and mint ...
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27 views

How does the Fed get money [duplicate]

As far as I'm aware, the Federal Reserve has 4.5$ Billion on its balance sheet. Where did it get the money for buying all those assets? I understand that it makes money out of interest on the bonds ...
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68 views

Why did the rate of money supply growth accelerate from 1993-96 in the United States?

Even though the rate of growth in the monetary base decelerated — and the money multiplier decreased for the most part — from 1993-96 in the United States, the growth rate of the M2 money stock still ...
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3answers
479 views

Basic Reason of Why the Money Supply Needs to Increase? [duplicate]

Hello, all. So I am trying to gain a thorough understanding of why the Fed, or any other Central Bank, needs to keep pumping money into the economy as it grows. My question is not asking why ...
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Why did the rate of money supply growth increase from 1993-96 in the United States?

Even though the rate of growth in the monetary base decelerated — and the money multiplier decreased for the most part — from 1993-96 in the United States, the growth rate of the M2 money stock still ...
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31 views

Fed, Asset prices, and the Economy

Often you hear people speak about how the Fed has created a fake economy, or one that is propped up with their support, and that they have artificially raised asset prices. What does this exactly mean?...
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35 views

How and when did the public learn of monetary policy changes before FOMC announcements and press conferences?

I've been reading about the Federal Open Market Committee's announcements of monetary policy decisions, specifically the time at which the announcements are made and then how the markets somewhat ...
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2answers
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Federal Reserve Securities Coming Due

Let's say the Federal Reserve purchases a \$100 one-year Treasury bill from the market, and puts ~\$100 of cash into the economy. A year later, this T-bill comes due, and the Treasury pays the Fed $...
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38 views

Can someone explain to me why no new bill exist to regulate financial derivatives yet? [closed]

Isn't it bad economically for soft regulation on financial instruments like derivatives.
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79 views

Wouldn't reducing Fed Balance Sheet lead to Inverted Yield Curve?

BACKGROUND I am involved in finance, but by no means an economist. I've been reading Ben Bernanke's "The Courage to Act" and have become interested in QE1 and QE2. Currently, I am trying to ...
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66 views

The Federal Reserve is only issuing cash money?

When the Federal Reserve is issuing money, they are only printing cash money (coins and banknotes)? If not, then what other types of money they are issuing?
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65 views

Why would increased inflation increase the value of the dollar and bond yields?

I was reading this Fortune article (http://fortune.com/2016/11/14/donald-trump-victory-dollar-inflation/) and came across this confusing quote: "'Clearly the market has settled on a 'buy dollar' ...
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1answer
54 views

What physically happens when foreign currency reserves change?

Assume that the United States decided to hold more yuan in the federal reserve. Which processes does that involve? I assume there is some sort of electronic exchange between the two central banks ...
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2k views

How does the Federal Reserve remove money from circulation?

I was watching a video about what gives money its value, and they say it's the total number of bills in circulation. The Federal Reserve can print or remove money from circulation. But if somebody ...
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94 views

Federal Reserve Interest

Banks have higher interest rate for debts than deposits to make money but does the U.S. treasury have the same interest rate for loans and deposits?
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1answer
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Why does the Federal Reserve seem to hold so much weight on the unemployment rate, relative to labor participation?

The title is the question. In the press conference held yesterday, the Chair referenced "unemployment" 18 times, relative to "participation" 3 times. If the labor participation is at the lowest ...
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110 views

What is a bilateral currency swap line? [closed]

Please explain in simple terms. How exactly does it function?
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3answers
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What is the effect of Quantitative Easing on the US budget deficit?

Is the deficit getting larger because of QE?
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1answer
277 views

Is there any scientific proof that 2%-3% target inflation rate is ideal?

There are a couple of central banks (RBA, Federal reserve for example) that use inflation rate as a key indicator to regulate their official cash rates. Those target inflation rates usually range ...
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58 views

Can a government or central bank work to reduce inflation without hiking interest rates and causing the currency to appreciate?

Since trying to lower inflation will have some undesirable consequences, such as currency appreciation, which hurts exports, should governments and central banks keep hands off on inflation? But ...
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586 views

Why not just print money to combat deflation?

If interest rates are zero and inflation is under 2% per year then why not have the fed print money without borrowing until inflation is back at 2% per year? The money could be used to pay off the ...