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Friday, 30 January 2015

There are three main tools of monetary policy that the Federal Reserve uses to influence the amount of reserves in private banks:-

http://en.wikipedia.org/wiki/Federal_Reserve_System#cite_note-91

Open market operations:-

Purchases and sales of U.S. Treasury and federal agency securities – the Federal Reserve's principal tool for implementing monetary policy. The Federal Reserve's objective for open market operations has varied over the years. During the 1980s, the focus gradually shifted toward attaining a specified level of the federal funds rate (the rate that banks charge each other for overnight loans of federal funds, which are the reserves held by banks at the Fed), a process that was largely complete by the end of the decade.

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