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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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.
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user25878
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What is the best observable proxy for the instantaneous risk-free market interest rate?
I am exploring a number of different models using daily data, of the US economy, and am trying to gather up observable proxies for some of the most important macro and micro variables, and surveying ...
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Is there a relationship between stock market hedge fund leveraging and the repo market?
Lately there have been many articles attempting to link repo-market borrowing with equity market increases. 1
I can see a link if the hedge fund is buying treasuries or mbs and financing it by using ...
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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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Is an alternative other than negative interest rate possible?
Currently there is a lot of talk about negative interest rate and possibly US would be adopting that. Denmark was the first country in the world which has "successfully" applied negative interest rate....
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Is it possible to see the precise steps that the Fed uses to make its decisions?
The current economic in the US is very complex and uncertain. Is it possible to see the precise steps that the Fed uses to make its decisions? Why did they choose a rate of that amount and not another ...
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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 ...
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What is the privilege of a primary dealer?
Primary dealers have a privileged position, so there is value in being registered as a primary dealer. - https://economics.stackexchange.com/a/13450/8387
I was previously under the assumption that ...
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Why aren't open market operations a zero sum transaction?
I know that when the Federal Reserve buys Treasury bonds it increases the money supply, but I don't understand the process behind it. The model that I have given below (which is my best understanding ...
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The Fed Lowered Interest Rates, Are they going to buy Bonds?
I originally asked this question on personal finance/money because I didn't know that this exchange site existed. link to same question at person finance/money. Someone on that site mentioned that it ...
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What is it about the money market safeguards that increase volatility?
In recent coverage of the Fed's repo operation, I was struck by this line:
It also indicated Wall Street is struggling to absorb record sales of
Treasury debt to fund a swelling U.S. budget ...
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Why are bond yields so low when Fed is cutting rates?
Fed cut its rates for the first time in 10 years in July and it is about to cut the rates at least by 25 basis points during its September meeting.
Usually, when Fed cuts the rates the bond yields ...
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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 ...
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How does the Fed choose its asset purchase rate in an ample reserves era?
The St. Louis Fed's article "A New Frontier: Monetary Policy with Ample Reserves" states that the Fed now uses the IOER and ON RRP rates to set the FFR, instead of open market operations, which are no ...
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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 ...
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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 the historically narrow asset class purchases from QE
Let's begin by mapping out some context by assuming the following goals of implementing QE:
prevent dire systemic liquidity concerns
reach inflation targets
manage expectations in the private sector
...
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How did the Federal Reserve determine 3.5T USD in assets?
The financial media have reported that...
In general, Fed officials appear to have converged to a minimum
balance sheet of roughly $3.5 trillion, which means the runoff would
end in the second ...
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Why's Bernie Sanders wrong to allege that JP Morgan received more than $390 billion in financial assistance from the Fed?
This r/badeconomics post avouches:
[JP Morgan] received more than $390 billion in financial assistance from the Fed.
Sanders has repeated this lie for several years. He gets the \$...
user4020
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Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase?
Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase?
I understand that to increase the money supply, the ...
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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 ...
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How do central banks earn profit?
I thought of Central banks as the regulators of financial markets. But surplus reserves of some Central banks surpass giant corporate companies.
Please explain me how do they manage to make profit in ...
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Why doesn't the central bank extend loans directly?
I've been thinking about the credit theory of money lately and how it creates money. Since Banks look for sufficient reserves after extending a loan, and since the central bank always loans out money ...
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Difference between "Level" and "Flow" in the Z.1 Fed data
The Z.1 Fed data can be found in FRED.
I notices that many similar data sets are labelled "Flow" or "Level". For example,
Financial business; total liabilities, Flow
Federal government; total ...
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Where the money from QE goes
So when QE is used (or something similar that results in printing mone), where does the newly created money go? Does some entity get free money? Why is that allowed?
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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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Did the Nixon shock cause skyrocketing real estate prices in the US?
Ca. 1970 the prices of real estate started skyrocketing in the US: Real estate prices chart. Same with gold: Gold prices chart.
So my conclusion is that real estate did not increase in value, it was ...
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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) = ...
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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 ...
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How does national debt work?
I'm trying to understand national debt. I gather that the United States, and other nations with central banks, accrue debt basically by printing new money at their central bank. This, I hypothesize, ...
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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 ...
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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 ...
user18
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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. ...
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Dynamic factor model for inflation (UIG)
I'm trying to replicate some results of Fed Underlying Inflation Gauge (UIG) model, which is a dynamic factor model to capture inflation trend. https://www.newyorkfed.org/research/policy/underlying-...
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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 ...
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Considering how USD enters the market, is the USD actually unbacked? Could the USD represent a unit of a “fund” of securities held by the Fed?
From my understanding, all new money enters the market either 1) by the Fed lending it to banks, so the Fed essentially owns bonds in the exchange, or, 2) The Fed purchasing other financial assets. So ...
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What happens when a reserve bank runs out of foreign currency reserve?
What happens to a country when a reserve bank runs out of foreign currency reserve?
user13954
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Does Fannie Mae get money from the FED
Does Fannie Mae directly or indirectly get money that is printed from the federal reserve to buy mortgages, or have they ever? If so, when has this happened? How much money? What is the process by ...
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Does the separation of FinCEN, and The Federal Reserve protect the integrity of a representative democracy? [closed]
From my understanding, FinCEN is controlled or heavily influenced by the UN. In addition, The Federal Reserve is not a governmental body, yet it has appointees from the current administration.
I'm ...
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How does the Fed predict Economic Growth?
Which factors or formulas are used by the Fed to predict Economic Growth?
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The Fed has a $4.5 trillion balance sheet: where did they get that money?
Who paid for that $4.5 trillion balance sheet?
https://www.cnbc.com/2017/09/19/hedge-fund-titan-ray-dalio-says-to-succeed-in-markets-you-need-to-bet-against-the-consensus--and-be-right.html
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Is the Federal Reserve issuing money in a fair way?
Basic logic says that, once a central bank is issuing new money for increasing the money supply, the money should be distributed fairly between all the citizens, and that means giving them all an ...
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How much physical currency does the Fed transfer to banks per year?
I just wonder since money has to enter the system somehow. Currently the Fed will supply whatever banks ask to meet their capital needs. But how much physical currency does the Fed, treasury, and mint ...
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How does the Fed get money [duplicate]
As far as I'm aware, the Federal Reserve has 4.5$ Billion on its balance sheet.
Where did it get the money for buying all those assets?
I understand that it makes money out of interest on the bonds ...
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Why did the rate of money supply growth accelerate from 1993-96 in the United States?
Even though the rate of growth in the monetary base decelerated — and the money multiplier decreased for the most part — from 1993-96 in the United States, the growth rate of the M2 money stock still ...
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Basic Reason of Why the Money Supply Needs to Increase? [duplicate]
Hello, all. So I am trying to gain a thorough understanding of why the Fed, or any other Central Bank, needs to keep pumping money into the economy as it grows. My question is not asking why ...
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Why did the rate of money supply growth increase from 1993-96 in the United States?
Even though the rate of growth in the monetary base decelerated — and the money multiplier decreased for the most part — from 1993-96 in the United States, the growth rate of the M2 money stock still ...
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Fed, Asset prices, and the Economy
Often you hear people speak about how the Fed has created a fake economy, or one that is propped up with their support, and that they have artificially raised asset prices. What does this exactly mean?...
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How and when did the public learn of monetary policy changes before FOMC announcements and press conferences?
I've been reading about the Federal Open Market Committee's announcements of monetary policy decisions, specifically the time at which the announcements are made and then how the markets somewhat ...
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Federal Reserve Securities Coming Due
Let's say the Federal Reserve purchases a \$100 one-year Treasury bill from the market, and puts ~\$100 of cash into the economy. A year later, this T-bill comes due, and the Treasury pays the Fed $...
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