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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The Fed's repo amount and TGCR shows positive pearson correlation. How so?
If I understand correctly, repo (https://fred.stlouisfed.org/series/RPONTSYD#0) → easier to borrow and the interest rate decreases → Tri-Party General Collateral Rate (TGCR) decreases → monetary ...
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Can the federal reserve just "add zeros" to a bank's balance?
In The G word season 1, episode 3 the show mentions that when the government wants to stimulate the economy, it issues debt and takes that borrowed money to spend on whatever (bailouts, unemployment, ...
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Is the Federal Reserve waiving itnerest payments on its treasury portfolio?
I read a rumor on a forum that the Federal Reserve has recently (since the pandemic) been waiving interest payments on its portfolio of US treasury bonds and notes.
I was unable to verify this rumor ...
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Do bond prices increase due to increase in demand or increase in money supply?
When the Fed buys bonds, what will happen to the price of bonds in the open market?
Answer Key: Reward 1 point for stating the price will increase due to increase in money supply. (0 point is awarded ...
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Is the following information related to interest rates, and the Federal Reserve accurate?
There are actually two interest rates that are directly affected by the Fed. The Federal Funds Rate is the interest rate banks charge other banks who borrow funds to meet reserve requirements. If that ...
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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:
...
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Does the Fed Change the Discount Rate in Monetary Policy?
Here, it's given that:
The first tool used by the Fed, as well as central banks around the world, is the manipulation of short-term interest rates. Put simply, this practice involves raising/lowering ...
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Why can't banks print infinite money by running up huge debts at the secondary discount window rate?
Banks in financial trouble can borrow from the Fed at 1% interest. Would anything stop a bank from borrowing $1M every year plus the interest on all prior debt? Since their ability to make interest ...
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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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What is federal reserve interest rate?
This is part of an article:
the causes are not the same and the Federal Reserve Bank may not
achieve the desired results by increasing interest rates,
What does it mean? What interest rates can ...
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If someone from another country mines and sells cryptocurrency to an American for US Dollars what happens to the US money supply?
I would imagine this would act like a trade deficit and the money supply would go down. If I'm correct there, how does the Fed track these random depletions from the money supply? If they are ...
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FRED Data - Recession indicators
I'm interested in using FRED data for investment purposes, but I'm wondering about the timeliness of the data.
One metric that looks to be pretty informative for the stock market is new unemployment ...
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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 ...
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How much money is, on average, "on loan" from the Fed?
The Fed maintains its target interest rates by "lending" money to commercial banks:
When the actual federal funds rate is higher than the target, the Federal Reserve Bank of New York will ...
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What is the worst potential outcome if the Fed "loses credibility?"
With Bullard recently stating:
“Our credibility is on the line here and we do have to react to the
data,” he added. “However, I do think we can do it in a way that’s
organized and not disruptive to ...
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Eurodollars - the real reason for the "Greenspan conundrum?"
While the jury seems to still be out on a similar question I posed earlier: Why did Greenspan think rate hikes would increase treasury term premiums?, I have recently begun entertaining an entirely ...
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Are major banks in US necessarily going to benefit from the rise of federal fund rates?
https://wtvbam.com/2022/01/05/fed-funds-futures-see-rate-hike-in-march-after-minutes-of-policy-meeting/
It is believed that Fed is very likely to raise the Federal Fund rates in the next a couple of ...
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Why did Greenspan think rate hikes would increase treasury term premiums?
Greenspan once called long-term treasury yield's continued downtrend despite his multiple rate hikes a "conundrum."
The Fed has research on what is often called "Greenspan's Bond Yield ...
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Which people or institutions own the assets of the Federal Reserve System?
At this website, I see that the total assets of the Federal Reserve System are worth more than 8 trillion dollars. Which people or institutions own these assets?
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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 ...
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Why does the Fed's issuance of bank reserves to buy long-term Treasuries, shorten the overall maturity of government debt in private hands?
I quote Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University. Is the Fed To Blame for Inequality in America? – Pairagraph Can you economists ...
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What causes rate transmission to be slow?
A recent quote from David Rosenburg on rate hike expectations reads:
Remember, everything the Fed does in a moment of time has a peak
impact on the economy 12 to 18 months later. Thus, raising rates ...
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Why do we have *daily* series of T-bill yields?
I understand that each week the US Treasury issues new T-bills at different maturities (1-month, 3-months, 1-year, etc). As far as I understand, this issuance happens every Tuesday. After the auction, ...
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Why does the federal funds rate differ from the IOR rate?
If I am not mistaken, the federal funds rate is the rate at which commercial banks, money market funds and market makers pay for overnight US Treasuries. In theory, it should be equal to the IOR rate, ...
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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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Why isn't the Federal Reserve interest rate set by a published algorithm?
The Federal Reserve sets the interest rate, presumably based on a number characteristics and trends in the economy: inflation, GDP growth, population growth, unemployment, housing prices, etc.
However,...
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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. ...
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How the Fed and Treasury coordinate on liquidity management
On top of the Fed's USD120bn monthly treasury/MBS purchases, the drawdown in Treasury issuance over the last year has also added over USD1tr to the system. The premise is, faced with drawn-out debt ...
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Why do we need independent central banks?
Why should we have an independent central bank? Why can not the govt itself do the job that central bank does?
One logic people give is that governments are elected for short term and may take ...
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Why is IOER so much higher than short term Treasury yields?
Interest on excess reserves is currently at 0.15%, but the yield on 1, 2, 3, and 6 month Treasury bonds are all only 0.05%. Why is this the case? Shouldn't IOER be about the same if not lower than the ...
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Did Capitalism and Adam Smith Support a Central Bank?
Does Adam Smith and Capitalism support a Central Bank/Federal Reserve?
I am trying to read through the book "Wealth of Nations" to understand. Having a central/regulatory figure dictate ...
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At what frequency does monetary inflation compound?
The M1 money supply of the U.S. dollar is released monthly. But how often does the Federal Reserve or treasury add/remove a new dollar or a new penny? By second, minute, daily?
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Has there really been a 170% increase in M1 money supply in the US in February 2021?
tradingeconomics shows an M1 money supply of the past year as follows:
This suggests an unusually high increase of ~170% in February 2021.
Is this increase real or somehow an artifact of the way the ...
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Do Fed OMOs directly and immediately increase M1 or M2 if they buy treasuries from a member bank? And what proportion of OMOs does that constitute?
I commonly hear that when the Fed conducts open market operations, it is directly increasing the money supply by exchanging newly created electronic money for US treasuries. But in the case where the ...
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What is the purpose of taxes if central banks can fund deficit spending?
Somewhat straight forward. If the federal reserve can print money to buy treasuries to fund deficit spending, what is the purpose of taxes? Sure, taxes reduce the amount of deficit that needs to be ...
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Does FED's change in short-interest rates impact long term rates?
Through changing the federal fund rate(short-term), does this empirically impact the longer end of the curve? If so, what is the logic or transmission mechanism that caused the change?
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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 ...
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How come Fed doing RRP could push short term interest rates below 0?
So there is this Reuters article, saying that the amount of cash has peaked in Fed's RRP facility, meaning that it has entered the RRP market. It also claims that this could push short term interest ...
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US Reserve Currency Status Impact on Inflation
Since US dollar has global reserve currency status meaning that other countries need to keep a certain amount of US dollar as reserves.
There's a narrative that being a reserve currency, if US prints ...
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How the Federal Reserve Manages Money Supply
I'm trying to understand how the Federal Reserve manages the money supply via open market operations. According to this post, when Fed buys securities, that increases bank reserves, which allows banks ...
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Why does central banks lowering interest rate incentivize more borrowing?
I'm a layman trying to understand how the US monetary system works. I'm particularly interested in how the Federal Reserve can create inflation without printing new dollars and putting them in M1. My ...
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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 ...
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Why is the Fed worried about short term interest rates going negative?
I refer to the following article: https://www.bloomberg.com/opinion/articles/2021-02-25/negative-interest-rates-could-be-trouble-unless-fed-acts, notably the following paragraph:
Market observers ...
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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, ...
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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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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?
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Are stimulus checks created out of thin air? [closed]
My question is regarding the checks which the US government has sent out during the pandemic. Below is a chart of M2 money supply increase as a result of it:
It is also said that 40% of all the m2 ...
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Is it easier to borrow money during a recession or high inflation period?
During a recession the FED applies expansionary monetary policies while during high inflation periods it contracts the money supply which respectively lowers and raises interests rates.
Given that ...
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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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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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