Editor's Note
The Fed's new operating system became fully operational in 2015.Under the new system, the Fed uses interest on excess reserves and overnight reverse repos to administratively set a range for the fed funds rate.
The Fed's large-scale asset purchases increased the monetary base but did not lead to a corresponding expansion of monetary aggregates or runaway inflation.
Today, there is no longer any substantial interbank lending on the fed funds market and the Federal Reserve continues to hold a large portfolio of longer-term Treasuries and mortgage-backed securities.
The Fed appears willing to relax the stance of monetary policy whenever the stock market begins to tumble.
Another crisis could mean a new round of large-scale asset purchases by the Fed and thus further intervention in credit markets - and lower, even negative, interest rates.
The Fed's new operating system provides a backstop for the Fed to absorb government debt without any apparent short-run consequence in terms of inflation, tempting Congress to delegate fiscal authority to the Fed.
https://www.cato.org/cato-journal/springsummer-2019
No comments:
Post a Comment