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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15
votes
5answers
2k views

How can banks pay interest to the central bank?

If the central bank is the only institution that can increase the monetary base (create both, digital and paper money), how can any institution that borrows from it (mostly banks) satisfy its interest ...
14
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2answers
990 views

How do reserves move between the 12 federal reserve banks?

In single central banks systems (e.g. Bank of England) then the final ledger for electronic money transfer is the adjustment of reserve account balances. In the Federal Reserve System, there are 12 ...
12
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5answers
15k views

Does the Federal Reserve buy and sell stocks?

Can the Fed buy and sell stock in publicly traded companies? Is there evidence of this and, wouldn't this behavior drive the price as opposed to actual market forces?
8
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4answers
244 views

Can absence of inflation be accounted for by a reconfigured class structure?

A previous and oft-heard question asked why no inflation results from the Fed pumping money into the economy. Are we simply seeing a methodical wage suppression, thus no official "inflation," while ...
8
votes
2answers
790 views

How and when is M0 money created?

The Federal Reserve Coin and Currency Service Website describes their currency order process thus: The 7.2 billion notes included in the FY 2015 order reflect the Board’s estimate of net demand for ...
7
votes
3answers
3k views

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 ...
7
votes
2answers
670 views

Why did the Federal Reserve change the data about USA GDP?

This is the data published on 20 March 2013 FOMC meeting: (http://www.federalreserve.gov/monetarypolicy/fomcprojtabl20130320.htm) 20 March 2013, Change in real GDP (actual): year 2008: -3.3% year ...
6
votes
1answer
1k 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 ...
5
votes
1answer
91 views

What impact did monetary policy actions taken during the Great Recession (2007-09) have on U.S. economic performance?

What impact did monetary policy actions taken during the Great Recession (2007-09) have on U.S. economic performance? Quantitative easing and unconventional policy actions such as asset purchases and ...
5
votes
1answer
124 views

What major monetary policy actions were taken during the Great Recession (2007-2009)?

What major monetary policy actions were taken during the Great Recession (2007-2009)? Quantitative easing and unconventional policy actions such as asset purchases and "forward guidance". I think I'm ...
4
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1answer
613 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. ...
4
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2answers
209 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 ...
4
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2answers
764 views

Why does the Fed control interest rates?

The Fed more or less controls interest rates using open market operations, but why? Why are interests rate not controlled by supply and demand?
4
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1answer
2k views

How often do banks borrow from the Federal Reserve?

Though I've seen plenty of articles talk about in what circumstances banks borrow from the Fed, I haven't seen any quantification on that note. On average, what percent of the money that banks lend ...
4
votes
2answers
266 views

What does the Federal Reserve intend to do with bonds it has purchased under QE?

In New York Magazine's interview with investor Mike Burry (made famous by The Big Short), he claims Quantitative Easing has left the Federal Reserve with an extraordinarily high leverage ratio: ...
4
votes
1answer
186 views

Federal Reserve capital injections

What were the specific conditions that the Federal Reserve attached to the capital injections forced upon the major Wall St. banks during the Great Recession? How and why do they differ from normally ...
4
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1answer
204 views

Why is the Fed considering increasing interest rates?

America's Fed Funds rate is below 1% and its growth rate is 3.9%. India's lending rate is approximately 9.5% and its growth rate is 5.1%. India just dropped its lending rate while the US is ...
4
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2answers
887 views

Federal Reserve Open Market Operations

I am trying to understand how the Fed effects the fed funds rate. Here it says: Once the Federal Open Market Committee deems that economic conditions warrant a change in the money supply through ...
3
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3answers
276 views

By what steps and contracts does new money enter the economic system?

Like many noneconomists who read about economic history and finance, I always remain somewhat baffled by the opaque generation of currency under the federal reserve system. My understanding is that ...
3
votes
1answer
121 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 ...
3
votes
1answer
101 views

Are Open Market Operations a Gift to the .1%?

My Background I was an Economics major a long time ago and I don't work in a related field. I have this question that's been nagging me. I hope somebody can answer the questions at the bottom. ...
3
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3answers
192 views

Does the current situation of excess reserve imply failure of QE?

Excess reserve @ Fed In the past it was assumed that excess reserves should be kept around 0 and banks should be lending to each other as much as they are borrowing. The central banks would correct ...
3
votes
1answer
170 views

Is monetary expansion the same as quantitative easing

Is monetary expansion policy the same as quantitative easing (i.e the buying of US treasuries by Federal reserve which injects more USD into the economy)?
3
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1answer
108 views

What would happen to the economy if the Fed's discount window completely stopped?

I'm curious what would happen the the US economy (and perhaps others) if the overnight lending capability of the Fed ceased operation for some reason (perhaps a cyber attack) for a non-trivial period ...
3
votes
2answers
164 views

What might happen if the Fed stopped paying interest on excess reserves?

I am curious to hear what economists think might happen if the Fed stopped paying interest on reserves held in excess of the penalty free upper bound. I am also curious to know how economists think ...
3
votes
1answer
107 views

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) = ...
3
votes
0answers
11 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 ...
3
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0answers
26 views

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 ...
3
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3answers
91 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 ...
2
votes
1answer
98 views

What assurances are there that the Federal Reserve does not give money to banks?

My understanding of the operation of the United States Federal Reserve Bank is that it invents dollars by a unilateral, unbalanced credit to its own account and then it loans this money to member ...
2
votes
1answer
284 views

Who owns the federal reserve?

Does anyone know who actually owns the federal reserve? It's like a public private institution, who are the private owners, and who are the public owners?
2
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3answers
76 views

What is the mechanism for when the fed purchases a gov't or corporate bond from a non bank?

My understanding is when the fed buys a bond from a bank they use bank reserves (bank reserves are swapped for a bond). How does the transaction differ when a non bank (ex hedge fund) is involved?
2
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2answers
136 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 ...
2
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2answers
67 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 ...
2
votes
2answers
113 views

Why did the EUR/USD go down immediately when the Fed cut interest rate?

I was following the Fed’s decision on interest rates. I thought if there is an interest rate cut, the EUR/USD will go up but contrary to that it went down on 07/31/2019 immediately after the decision ...
2
votes
1answer
3k 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 ...
2
votes
1answer
151 views

Is there some background/explanation why the Fed discontinued publishing their M3 indicator, circa 2006?

As Wikipedia says and as it can be easily verified, since 2006, the Fed no longer publishes an M3 indicator (unlike the ECB which still hangs on to that notion). So is there some background or ...
2
votes
1answer
635 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 ...
2
votes
3answers
2k views

What is the effect of Quantitative Easing on the US budget deficit?

Is the deficit getting larger because of QE?
2
votes
1answer
38 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 ...
2
votes
1answer
49 views

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 ...
2
votes
3answers
43 views

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?...
2
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2answers
136 views

How is the Corona $2 trilion stimulus package going to be financed?

Perhaps this is a simple question but as a non-US citizen I don't understand how the US government is going to finance the $2 trillion stimulus package to combat the economic damage due to the Corona ...
2
votes
1answer
49 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(...
2
votes
1answer
36 views

How does the Federal Reserve reduce “excess reserves”?

Over the last few years, the amount of currency is circulation (and the corresponding liability on the Fed's balance sheet) has been growing; however, the asset side of the BS hasn't increased. By ...
2
votes
1answer
46 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 ...
2
votes
1answer
169 views

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 ...
2
votes
1answer
354 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 ...
2
votes
2answers
155 views

When the Fed increases the money supply, does any of the additional supply go directly to the government?

When a central bank increases the money supply, how much of it goes directly into the government purse? Say for example: The money supply is $150 The populace has $100 The government has $50. If the ...
2
votes
1answer
78 views

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?