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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26 views

How did the US Government fund its deficit when the Federal Reserve was pruning its balance sheet in 2018-1019?

The primary way for Governments to fund their deficits is by issuing new currency from the central bank against new treasury bonds. The Federal Reserve reduced its [balance sheet]1 from 4.4 trillion ...
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27 views

Why is market absorption of issued US Treasury Bonds (with the Fed purchase plan) a problem?

Financial market reports suggest that there are uncertainties about the Federal Reserve's ability to absorb new US Treasury Bonds issued in larger quantities to support the US government's growing ...
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Why it is important to observe if the 10Y treasury yield moves nowadays?

in the context of low yields, where fed continues with fiscal stimulus, I've heard from many economists that this week the 10Y treasury rate has been finally increasing. In which situation is this ...
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Where can I retrieve a complete history of macro economic data annoucements?

I'd like to get the complete ( well at least the last 20 years) history of economic data announcement calendar firstly for US and secondly for G5 countries. I have found many websites that propose the ...
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23 views

What's the advantage of repurchase agreements over collateral backed loans?

Is there any material difference between a repo and a collateral backed loan? The one I can think of is that the collateral is owned by the lending party during the loan. So if the Fed uses this with ...
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1answer
36 views

Do open market operations permanently increase the money supply?

Suppose the Fed buys 1000 dollars worth of T-Bills in the open market to try decrease interest rates and increase the money supply. It does this by printing money and electronically increasing the ...
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1answer
49 views

Is there an alternative to currency to facilitate exchange of goods and services?

Say I have collected a bunch of seashells. Tom wants to have my seashells. Therefore the seashells have value and I have just created wealth. And so Tom buys my seashells for \$10. But even though I ...
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17 views

Why stimulus money comes to emerging economy stock market inspite of their high valuations?

Since March 2020, India has seen an unprecedented Foreign Portfolio Investor(FPI) inflow of 28 billion dollars. Here is how I have understood the flow; Federal Reserve infuses liquidity by going on a ...
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2answers
67 views

When does US Federal Reserve redeem the corporate bonds it bought?

The US Federal Reserve did the corporate bond buying program in the 2008 crisis and again now during the 2020 pandemic. What happens to the bonds it is buying? That is, someday it matures and ...
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Due-diligence behind discount window lending

Its clear the Federal reserve is doing risk assessments at the discount window since they separate credit into primary and secondary. I'm curious how secondary credit risk is handled. Given that ...
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When are banks allowed to fail?

If the Federal Reserve acts as a lender of last resort and steps in to prevent bank runs, then how do banks still fail? Do they only step in if the bank is solvent but in emergency need of funds?
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How does the fed pump the stock market [closed]

I've been hearing a lot about the fed "pumping the stock market" with trillions of dollars to maintain prices. I know the fed isn't allowed to actually buy stocks so how is this money being ...
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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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2answers
60 views

Interest rate determination in the real world

I have just learnt about the demand and supply framework for money and how the equilibrium interest rate in an economy can be determined. In theory, based on that framework, an increase in nominal ...
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overnight index swaps OIS

I'm writing a paper where I am using expected federal funds rates at different horizons and wanted to use the OIS as a proxy for what the market expects the FFR to be post FOMC-meetings. However, I ...
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1answer
48 views

Why is the fed forbidden from buying gov't debt directly from the treasury?

I know it's forbidden in its charter. But what is the economic rationale?
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Does treasury pay interest+ face value to the fed?

heard all the profit that the fed makes goes into treasury.. does that mean the treasury department can make unlimited money buy selling bonds to the fed? like if they issue bond to people, and the ...
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CPI dataset from BLS

I hope this question is not inconvenient for any of you, so I would appreciate if you do not mark it as not useful. I want to work with the data of the CPI from the BLS (I am not American, and this is ...
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1answer
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Why did Federal Reserve buy already-issued corporate bonds, ETFs, and agency commercial mortgage-backed securities?

I screen-shot WSJ on Sep 18 2020. I'm assuming that Fed Primary Market Corporate Credit Facility didn't buy ALL newly issued corporate bonds? Please see question in title. Why didn't Federal Reserve ...
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Why would mortgage rates go up if interest rates go down?

What reasons or scenarios could cause a case where mortgage rates would rise if interest rates(federal funds rate) fall? Is that even possible?
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How does high U.S. federal debt affect its citizens?

My apologies if this is a silly question. My background isn't in economics, though wish I had some. During the 2008-9 financial crisis, federal debt increased significantly and there was a small talk ...
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1answer
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How is reserve money 'multiplied' by the banking system?

I'ma an econ newbie so please forgive my lack of understanding. I am confused as to how the money multiplier effect works. I get that the money multiplier effect doesn't actually hold true as banks ...
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1answer
33 views

What does “writes a check to Congress in exchange for them” mean in this context?

On page 192 of the 5th edition, George Edward Griffin begins to describe the "Mandrake Mechanism", chapter ten, in "The Creature from Jekyll Island". First, the Fed takes all the ...
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54 views

How does the U.S. Fed printing money result in a debt for future generations?

I'm unclear when I see news articles about how the U.S. Treasury will borrow $2 Trillion in the second half of 2020, why would the Fed printing money result in a debt for future generations? I can ...
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How does the Fed's stimulus push stocks markets higher?

I read that the Fed’s stimulus last March has contributed to a spectacular rally in stock markets. And indeed S&P500 has increased a lot since March. But how does the mechanism work? How does the ...
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298 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 would banks not want to lend, under Federal Reserve's Main Street Lending Program?

The Fed is paying 95% of the loan, so why would the banks be scared of lending? Even if the bank loses their 5% because they partaked in Fed's Main Street Lending Program, can't the Federal Reserve or ...
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How does the Greenspan/Bernanke Put semantically relate to put options?

If rational investors reckon that "the Fed, under Alan Greenspan, its longtime chairman, would always bail stock investors out of their losing positions", then rational investors would buy ...
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1answer
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Negative interest rate on bond yield

In Black-Scholes model $r$ is defined as risk-free interest rate. What I have understood is that risk-free comes from the yields on sale of government bonds. What does that mean if the interest rate(...
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Relative importance of the federal funds market in the post-2009 US economy

In the pre-financial crisis US economy, depository institutions had almost no excess reserves. Hence, it would make sense for some banks to have shortages of reserves and some with excess of reserves. ...
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27 views

Federal Reserve OMO money goes to the Treasury? [duplicate]

If Federal Reserve performs open market operation by selling government securities then Fed gets money, who keeps that money? Does it go to Federal Reserve Deposit or the department of Treasury or ...
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What is the purpose of the Treasury issuing bonds?

I have always thought that the US Treasury issues bonds to raise money to allow the US to pay off debts in the short- and long-term. However, recently, I have read in a book on Modern Monetary Theory ...
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36 views

What does the Fed do with their profits?

As far as I understand the system the Fed prints money which it then uses to buy bonds. Bonds are basically statements of debt meaning that the Fed receives interest from the parties it has bought the ...
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How much moral hazard from Federal Reserve's purchase of junk bonds? [closed]

Why doesn't the Federal Reserve appear to worry Moral Hazard? How bad's the Moral Hazard? The Fed is creating money to transfer to the balance sheets of corporations that invest in securities like ...
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60 views

Why's Federal Reserve buying individual corporate bonds, when corporations have been selling them successfully?

On Jun 15 2020, the Federal Reserve is expanding its Secondary Market Corporate Credit Facility into corporate credit to now buy individual corporate bonds, on top of the exchange-traded funds it ...
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Does the government ever pay back its debt from the OMO to the Fed? [closed]

I'm getting confused about how exactly does money being created by the Fed. From investopidia.com: ...
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1answer
54 views

Why do banks keep vault cash instead of depositing all reserves at the central bank?

In what way to commercial banks benefit from keeping some of their excess reserves in the vault as opposed to depositing all of their excess reserves with the central bank (assuming the central bank ...
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1answer
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Why doesn't QE cause the federal funds rate to continue decreasing?

Quantitative easing (QE) is essentially a large-scale form of open market operations, in which the Fed buys large amounts of treasury bills of all maturities (ranging from 1-month to 30-year) and ...
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1answer
117 views

How does the federal funds rate compare to the federal discount rate?

The federal funds rate is the interest rate charged to banks when they borrow from each other overnight in the federal funds market to satisfy their reserve requirements. This rate is influenced by ...
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2answers
64 views

What does the Fed mean by “smoothening money market functioning”?

In many recent interviews, Fed Chairman Jerome Powell has repeatedly mentioned that ensuring the smooth functioning of money markets is a key goal of the Fed's recent monetary policy actions. I want ...
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3answers
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When the federal reserve buys bonds or other assets from banks, do the banks make a profit?

My understanding is that the federal reserve is injecting money in the market by buying bonds and debt from banks. Do the banks make a profit on the sale of their bonds or corporate debt to the feds?...
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How central banks “create” negative interest rates?

How can the Fed push Fed Funds rate to negative? I think I understand how it works with >= 0 -- they just lend reserves for bonds until they hit their targets, but what about <0? Has this something ...
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1answer
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Are FedWire transfers and volume tracking exchanges of reserves between banks that have accounts at the Federal Reserve?

Looking at Fedwire® Funds Service - Monthly Statistics it appears that these transactions are between banks but I'm trying to confirm is whether the stuff they are exchanging is classified as reserves....
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Does the federal reserve create any type of deadweight/welfare loss?

In microeconomics, we learn that when a good is overproduced or under produced, there is a dead weight loss associated with it. It seems like the same concept would apply to macroeconomics, where the ...
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How can the Fed realistically address the issue of frontrunning (in the context of its ETF purchases)

In the first two days in which the Fed's corporate bond program started buying ETFs, purchases totaled around USD305m. The size of the program is much larger, and it would seem very reasonable to ...
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Regarding the role of the Fed in controlling interest rates

When it is said that the Fed cut interest rates, does this refer to the discount rate, fed fund rate or both?
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Impacts of Suspending Mortgage and Rent Payments

Recently, there has been some support for suspending rent and mortgage payments, the goal being to provide financial relief during the Covid-19 response. I'm wondering what the impacts for the ...
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3answers
182 views

How much more can the US Federal Reserve spend on COVID-19?

On Mar. 26 2020, the Federal Reserve’s Balance Sheet Tops $5 Trillion for First Time. Is the Fed's spending capped at some maximum? I studied in Canada and am ignorant of U.S. I'm asking about just ...
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Must US Treasury backstop US Federal Reserve?

The Constitutional Case for the Fed's Treasury Backstops | Cato @ Liberty writes no, I think? But I don't quite understand the financial terms iike "lever-up", backstop", "helicopter money". I looked ...
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Can m0 be created as a loan? [closed]

Are the following true? m0 is only created by destroying something else (federal reserve deposits)? m0 can be created as a loan? Related questions: can something other than federal reserve deposits ...