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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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 ...
user avatar
15 votes
2 answers
1k 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 ...
Corvus's user avatar
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14 votes
5 answers
20k 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?
dnbwise's user avatar
  • 261
9 votes
4 answers
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 ...
Joe Jobs's user avatar
  • 972
9 votes
1 answer
610 views

Why did the Federal reserve balance sheet capital drop by 32% in Dec 2015?

Here's a graph of the capital on the Federal reserve balance sheet from 2003 until present: https://fred.stlouisfed.org/series/WCTCL Capital dropped by 32% in December 2015. Is there anywhere I can ...
dharmatech's user avatar
8 votes
4 answers
270 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 ...
Nelson Alexander's user avatar
8 votes
2 answers
1k 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 ...
Kinnard Hockenhull's user avatar
7 votes
2 answers
697 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 ...
reinardhz's user avatar
7 votes
1 answer
282 views

M2-M1: what's left in the delta?

If you subtract M2SL - M1SL, the chart looks as follows: The change is due to re-classification: M1 before: (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, ...
Sergei Rodionov's user avatar
6 votes
1 answer
142 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 ...
Amy's user avatar
  • 171
6 votes
1 answer
2k 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 ...
user2133034's user avatar
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 ...
MWB's user avatar
  • 511
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 ...
Victor's user avatar
  • 207
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 ...
J Li's user avatar
  • 291
5 votes
2 answers
1k 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?
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5 votes
1 answer
94 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 ...
Amy's user avatar
  • 171
4 votes
1 answer
656 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. ...
marshal craft's user avatar
4 votes
2 answers
256 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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4 votes
1 answer
550 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 ...
Tan Yong Boon's user avatar
4 votes
2 answers
90 views

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 ...
MWB's user avatar
  • 511
4 votes
1 answer
98 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 ...
SalahTheGoat's user avatar
4 votes
1 answer
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 ...
B T's user avatar
  • 587
4 votes
1 answer
197 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 ...
JourneyManDesigns's user avatar
4 votes
1 answer
217 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 ...
user avatar
4 votes
2 answers
924 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 ...
BBSysDyn's user avatar
  • 153
3 votes
3 answers
288 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 ...
Tan Yong Boon's user avatar
3 votes
3 answers
318 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 ...
Nelson Alexander's user avatar
3 votes
2 answers
398 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 ...
Freek Nortier's user avatar
3 votes
1 answer
313 views

Reserve Requirements for Banks

Does the reserve requirements for US depository instiutions require a multi branch institution as a whole be compliant, or each individual branch of that institution be compliant? For example imagine ...
Rakin Munim's user avatar
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(...
Slartibartfast's user avatar
3 votes
3 answers
3k views

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

Is the deficit getting larger because of QE?
Brian Turner's user avatar
3 votes
2 answers
1k views

How much leverage has the Federal Reserve taken on today (Jan 2016)?

http://nymag.com/daily/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html?mid=twitter-share-di What makes you most nervous about the future? Debt. The idea that growth will ...
curious's user avatar
  • 545
3 votes
3 answers
217 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 ...
Revoltic's user avatar
  • 346
3 votes
1 answer
49 views

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 ...
J Li's user avatar
  • 291
3 votes
1 answer
78 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 ...
user avatar
3 votes
1 answer
179 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. ...
user avatar
3 votes
1 answer
198 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)?
Victor123's user avatar
  • 415
3 votes
1 answer
118 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 ...
jmsimpson68's user avatar
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 ...
Nelson Alexander's user avatar
3 votes
2 answers
230 views

Can the Federal Reserve permanently decrease money supply?

As far as I understand it, the primary way the Federal Reserve decreases the money supply is by selling bonds–the entities buying these bonds give up their cash for them and thus M0 is decreased. ...
lurning too koad's user avatar
3 votes
1 answer
27 views

Update of Fed mandate(2020) - "shortfalls of employment"

In this Fed link, it's stated that 1 of the most important changes in the document describing the Fed mandate/framework, is On maximum employment, the FOMC emphasized that maximum employment is a ...
An old man in the sea.'s user avatar
3 votes
1 answer
68 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 ...
philn's user avatar
  • 133
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 ...
leeand00's user avatar
  • 177
3 votes
2 answers
284 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: ...
Evan O.'s user avatar
  • 33
3 votes
4 answers
399 views

How to find interest rates with fractional reserve banking?

As I understand it, interest rates are set by supply and demand, like any price. Money can be thought of like any other finite commodity. Lenders are willing to supply a certain amount of money at ...
InquisitivePerson's user avatar
3 votes
2 answers
203 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 ...
123's user avatar
  • 2,911
3 votes
1 answer
48 views

Does low nominal interest rate encourage lending?

In expansionary monetary policy, it's written: The Fed purchases more government bonds to drive down interest rates and increase the money supply. Now, low interest rate can infer two things: ...
MangoPizza's user avatar
3 votes
1 answer
85 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?
Shuryu Kisuke's user avatar
3 votes
1 answer
116 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) = ...
Jacer's user avatar
  • 31
3 votes
4 answers
669 views

Who controls money supply if the fed does not?

This whitepaper states (bold mine): According to the consensus view, the two leading culprits of inflation risk today are the fiscal deficit and the money supply. To illustrate, take this CNBC ...
DPM's user avatar
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