tes, money market, which ultimately allows you to balance the demand for cash and cash offer. Thus, the increase in excess reserves, supplied to the market federal funds, leading to a drop in interest rates, and vice versa.can also borrow reserves from the Federal Reserve Banks use the so-called В«Discount window" and the interest rate, which is set for these loans is called the discount rate. Total number of funds, the adopted through the "discount window", as a rule, very small, because the Fed does not encourage such loans, except in cases where banks borrow to offset the short-term shortage of reserves. fact, the role of interest rates in the US monetary policy is that its change could signal a significant change in monetary policy. Raising the discount rate indicates an restrictive policy, and its decline could mean a transition to a policy of stimulating economic growth. See table 3 p 31
Open market operations are the main tool used the Fed to influence the supply of free reserves in the banking system. This term refers to ongoing Fed buying and selling government securities on the open market. These operations are conducted by the Federal Reserve Bank of New York. If the Fed wants to lower interest rates on federal funds market, it buys from banks in government securities, resulting in the amount of funds held by banks, is higher than the obligatory amount and the bank is able to provide the excess reserves as loans to other banks federal funds market. , The Fed buying securities on the open market increases the money supply in the banking system, resulting in lower interest rates on federal funds market. In order to increase bets the Fed sells government securities, and receives in payment of bank funds, which reduces the amount of the money supply in the banking system and leads to an increase in interest rates in the money market. and sales of foreign currency FOMC implemented jointly with the Ministry of Finance, bearing full responsibility for these operations. The Fed does not set in this area targets, or desired levels of exchange rates. Instead, the Fed takes measures to reduce the negative effects of erratic fluctuations in the currency markets, in particular, fluctuations caused by speculation and tend to impede the effective functioning of the currency markets or financial markets generally. For example, in some periods, characterized by a sharp depreciation of the dollar, the Fed bought the currency (by selling foreign), to counter the negative pressure. Foreign exchange intervention with the dollar, regardless of who is the initiator: the Fed, the Treasury or regulatory authority of a foreign country - should not change the amount of funds offered by banks in the money market or interest rates. Targeted prevention of the influence of foreign exchange intervention on bank reserves and interest rates, carried out by the responsible authorities, cannot use these transactions as an instru...
