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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1 answer
139 views

Why does the Fed raise the FFR before reducing bond holdings?

In recent months, the Federal Reserve has been purchasing bonds at a decreasing rate. This is evident in the flattening of the slope of the total assets plot. The Fed's total assets plot... The ...
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1 answer
45 views

Deriving the H.4.1 MBS data from the Agency Mortgage-Backed Securities Operations

MBS changes for June 2022 If I go through the H.4.1 data: https://www.federalreserve.gov/releases/h41/ and pull out the Mortgage-backed securities data, I get the following for June 2022: So \$1,882,...
3 votes
3 answers
8k 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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What were the biggest events in terms of Monetary Policy in May 1975?

Take a look at this plot, which is the daily American zero-coupon yield curve from 1975, as reconstructed by Liu and Wu (JFE, 2021): One can see a major change of shape in May, 1975. It seems that ...
3 votes
1 answer
110 views

How can the Fed enforce exit criteria if they begin yield curve control?

Over the past year, the notion yield curve control has resurfaced and appeared on FOMC minutes, decades after its last implementation. According to the Fed's introduction page: As the U.S. continued ...
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1 answer
53 views

ON RRP Facility and Bank Reserve

The ON RRP is, to quote Fed of NY, "dropping like a stone". From a balance sheet perspective, i understand that MMF are pulling out their funds out of the RRP facility. Everything else equal,...
1 vote
1 answer
107 views

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 ...
1 vote
1 answer
84 views

What treasury security SOMA holdings have matured so far this month?

Today is August 15th 2022. Let's say I'd like to know the treasury security SOMA holdings that have matured so far this month as well as the total that will mature this month. Here's one approach I've ...
1 vote
1 answer
33 views

A question about Ihrig et al. (2015) and the Fed's policy implementation prior to 2008

Ihrig et al. (2015) review the implementation of monetary policy in the US prior to and after the Financial Crisis of 2008-2009. In describing the Fed's approach prior to the crisis, based on open ...
3 votes
3 answers
289 views

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 ...
1 vote
0 answers
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Why are Fed's Tealbooks released with a 5 years lag?

In "On DSGE models", Christiano, Eichenbaum & Trabandt (2018) mentions the "so-called Tealbooks" (p.21). They also say that these Tealbooks are released with a 5-years lag. I ...
1 vote
1 answer
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Federal Reserve Stock Ownership Requirement for Banks

Why are banks required to own stock in the Federal Reserve?
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Does anybody know why the Fed Funds Effective Rate has 3 evenly spaced dips in between every FOMC meeting, that suddenly stop on March 21st 2018?

In general the effective rate was much more volatile the further back you go, but now it is perfectly straight, what has changed? The fact that it is exactly three evenly spaced dips of 8-10 basis ...
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Taylor Rule Model Specification: Serial Correlation and Interest Rate Smoothing

I'm reading this paper by Abrams and Iossifov. The paper investigates electoral cycles influence on monetary policy by estimating a Taylor Rule reaction function using OLS. The authors describe the ...
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3 answers
367 views

When the Central Bank sells a bond, where does the money go ultimately?

As the accepted answer points out, the premise of my question was flawed. Thank you for the dispelling of my wrong assumptions. The original question follows. There are two related questions (and ...
1 vote
2 answers
322 views

Loans create deposits, banks "are not reserve constrained"?

It is often said that banks are not "reserve constrained" when it comes to lending, and that loans create deposits (and therefore commercial banks create money). I have some doubts about the ...
2 votes
2 answers
61 views

What is the argument that suggests to the Federal Reserve that it is reasonable to cause a recession in order to prevent inflation?

The current risk of recession appears to be caused solely by the Federal Reserve's refusal to stop raising interest rates. When making this decision, the FRB seems focused solely on the risk of ...
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Can a Federal District Bank be negative in SOMA shares after interdistrict settlement?

I looked at publications examining whether the FED interdistrict settlement could apply to the Target-2 system. While most of my questions were answered, I am still left with one big issue I could not ...
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2 answers
52 views

Instead of quantitative easing why wouldn’t Stimulus at Checkout (SAC) work?

Instead of quantitative easing and interest rate reductions why wouldn’t Stimulus at Checkout (SAC) work? What is SAC? When the Fed needs to stimulate the economy, using Point of Sale technology, SAC ...
1 vote
0 answers
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Do some investment banks make a spread by borrowing from the Fed at low rates and earning from higher Treasury and agency bond yields?

In his 60 Minutes interview for promoting his book, The Big Short, Michael Lewis says this: if you look at their businesses right now they're heavily government dependent that if you were uh goldman ...
1 vote
0 answers
18 views

Did countries ever default against Federal Reserve's swap line?

Did foreign countries ever default against Fed's swap line or Foreign and International Monetary Authorities ? Or is it technically possible? I guess they will lose their collateral, and it's a big ...
3 votes
2 answers
435 views

Is Fiat Money Ultimately Tax Based?

First, I am not an economist, so seeking general "good enough" answers. Since Nixon went off the gold standard the U.S. dollar has been a fiat currency backed by federal debt. While I ...
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0 answers
19 views

When Cathie Wood says the Powell has 20x rates vs Volker 2x rates in 1981, is this the right way to look at it?

Cathie Wood regularly says the FED today gone too far with rate rises, saying they have raised rates 20 times from their 0.25% lows in 2020, where as in the early 1980 Volcker only doubled rates from ...
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Was the Federal Reserve Bailout of $85B to AIG in 2008 'printed money'

Was the federal reserve loan of $85 billion to AIG in 2008 done with existing reserves from the Treasury or were new reserves created and exchanged for assets at AIG similar to how the Fed performs ...
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1 answer
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How does the Fed supervise and regulate foreign branches of its member banks?

https://youtu.be/dka4fHQI4ZQ?t=46 According to the video, they say the Fed regulates and supervises foreign branches of its member banks, and I wanna know how the Fed does that. Does the Fed send ...
-1 votes
1 answer
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What process does a new bank go through to get its first central bank reserves?

Im trying to better understand how banks work and one of the first thing that confuses me is central bank reserves. Current understanding of central bank reserves: Central bank reserves never enter ...
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Fed Balance Sheet : flow of funds 2023-04-26

Fed Balance Sheet Changes Here's a chart of the Fed Balance Sheet changes for 2023-04-26: Flow of funds Here's some guesses as to how the funds flowed between items: ...
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33 views

How to explain negative correlation betwen FED funds rate and dollar volatility?

actually I am looking into monthly price data on bitcoin and the us-dollar (USD/EUR) and the monthly federal funds rate. I calculated the volatility by: ...
5 votes
3 answers
2k views

Is it true that the Federal Reserve is not federal and has no reserves?

The Money Masters is a 1996 documentary film that discusses the concepts of money, debt, taxes, and describes their development from biblical times onward. Its main points were summarized by a ...
5 votes
3 answers
861 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 ...
2 votes
1 answer
71 views

Are bailouts destabilizing the global economy?

I saw this posited in this WSJ opinion piece here Notes on the Fed In 1998, engineering a \$3.6 billion rescue of the giant hedge fund Long-Term Capital Management. In 2001, slashing interest rates ...
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3 answers
108 views

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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59 views

Federal Funds Rate & Reserves Market Contradiction

Edit: I do understand this isn't how things work anymore, since we are in a "Ample-Reserves Framework" and the quantity of reserves no longer makes a difference that much and it is primarily ...
1 vote
1 answer
63 views

Government debt held by the Federal Reserve

The Federal Reserve delivers its profits, after expenses, to the US Department of the Treasury. The Federal Reserve also holds several trillion dollars' worth of government debt. So when the ...
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1 answer
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Why does decrease in Feds fund rate lead to decrease in core PCE inflation rate?

According to the Fed's own forecasts inflation should reach 2% (as vowed) shortly after 2025 under normal circumstances from the below chart. I know that generally as Federal funds rate increases, ...
2 votes
2 answers
94 views

In the US, if the Fed stops hiking the Fed Fund Rate, how does it affect inflation rate?

I know if the Fed continues to increase the Fed Fund Rate, inflation eventually goes down. But what if the Fed stops hiking the current Fed Fund Rate, how does it affect current inflation rate if the ...
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0 answers
640 views

Calculating Core PCE Services excluding shelter/housing

On FRED, I would like to calculate monthly Personal Consumption Expenditures Excluding Food and Energy (Chain-Type Price Index) (PCEPILFE) (SA) excluding housing, either by removing it from this ...
2 votes
1 answer
73 views

Federal Funds Rate vs Interest on Reserve Balances in 2022

In the US context: Circa 2020 the minimum reserve balance requirement was removed, so I am not sure why do institutions need to borrow and lend overnight reserves among themselves? As far as I ...
-2 votes
3 answers
78 views

Current US inflation rate is 7.1% and Fed vows to reduce it to at least 2.00%, how long could that possibly take?

If the Fed keeps raising interest (e.g. 0.5%) and vows to reduce interest rate to at least 2.00%, how long could that possibly take? Thanks.
3 votes
2 answers
101 views

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(...
0 votes
2 answers
125 views

Is it possible for the stock market to beat inflation forever?

Just a few thoughts on the possibility of markets beating inflation in the long, long term (say, hundreds of years). I am a theoretical physicist, not an economist, so please forgive my ignorance. I ...
1 vote
1 answer
230 views

Are there still (2022) bank reserve requirements, and if not, how do open market operations now work with the target rate?

With several recent increases in the (U.S.) Federal Reserve's target rate, and accompanying news releases, I was refreshing my knowledge on how those changes actually operate. In the course of doing ...
1 vote
1 answer
29 views

How is commercial bank reserve requirement enforced

More specifically: What can be accounted as reserve (apart from actual reserve balance at a regional central bank) ? how/where do banks file their reserve amount? who verifies whether this informed ...
2 votes
2 answers
90 views

Why do monetary authorities (e.g., central banks) aim to impact "short-term" interest rates? Why not also long-term interest rates, or both?

When the Fed or a central bank changes interest rates, this impacts short-term rates first and foremost. But why is it that short-term interests are impacted as opposed to short- AND long-term, or ...
0 votes
1 answer
58 views

What is the refutation of this article about the FED being privately owned

What is the refutation of this article about the FED being privately owned I find this article and I would like to know what is the refutation. Please proper academic arguments.
5 votes
1 answer
587 views

Why doesn't conventional monetary policy involve long-term interest rate targets?

Another way to phrase my question: why doesn't conventional monetary policy include manipulation of long-term interest rates? This question might sound "weird" at first glance, but please ...
3 votes
1 answer
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Does having a dual mandate erode central bank independence?

To begin with, CB (central bank) independence is defined as not being subject to government influence. If CB only cares about inflation, it is easy to be independent. If CB also needs to guarantee ...
1 vote
1 answer
155 views

How the fed influences treasury rates through open market operations

Lower yields through open market operations When the fed wants to put downward pressure on treasury rates, one tool it can use is open market purchases of the tenor it wants to push yields down on. ...
2 votes
1 answer
60 views

Maturing US Treasury Securities: value from TreasuryDirect vs New York Fed SOMA Holdings

TreasuryDirect If I query TreasuryDirect for securities that are maturing in Aug 2022: ...
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1 answer
38 views

Is it silly and why is it silly to automatically set the Federal Funds Rate to be a fixed math function of recent CPI, PPI etc?

Is it silly and why is it silly to automatically set the Federal Funds Rate to be a mathematical function of recent CPI, PPI etc? (Or other macroeconomics data). As a silly and simple example, if CPI ...

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