The Fed Has Two Tools to Influence Money Market Conditions | Metals Mine

  • The Fed Has Two Tools to Influence Money Market Conditions

    From libertystreeteconomics.newyorkfed.org

    The Federal Reserve’s 2022-23 tightening cycle involved the use of two monetary policy tools: changes in administrative rates and changes in the size of its balance sheet. This post highlights the results of a recent Staff Report that explores how these tools affect money market conditions. Using confidential trade-level data, we find that both tools have significant effects on the pricing of funds sourced through repo. These results suggest that the Fed can manage how financing conditions are affected even as it influences economic conditions. For example, the Fed can lower its administrative rates to loosen ... (full story)

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