It is commonly believed that the Fed's ability to control the federal funds rate stems from its ability to alter the supply of liquidity in the overnight market through open market operations. This paper uses daily data compiled by the author from the records of the Trading Desk of the Federal Reserve Bank of New York over the period March 1, 1984, through December 31, 1996. The author analyzes the Desk's use of its operating procedure in implementing monetary policy and the extent to which open market operations affect the federal funds rate-- the liquidity effect. The author finds that the operating procedure was used to guide daily open market operations. However, there is little evidence of a liquidity effect at the daily frequency and even less evidence at lower frequencies. Consistent with the absence of a liquidity effect, open market operations appear to be a relatively unimportant source of liquidity to the federal funds market.

Graph and download economic data for Overnight Reverse Repurchase Agreements Award Rate: Treasury Securities Sold by the Federal Reserve in the Temporary Open Market Operations (RRPONTSYAWARD) from 2013-09-23 to 2025-06-06 about reverse repos, overnight, securities, Treasury, sales, rate, and USA.

The Federal Reserve's balance sheet has undergone significant changes since 2007, reflecting its response to major economic crises. From a modest *** trillion U.S. dollars at the end of 2007, it ballooned to approximately **** trillion U.S. dollars by May 2025. This dramatic expansion, particularly during the 2008 financial crisis and the COVID-19 pandemic - both of which resulted in negative annual GDP growth in the U.S. - showcases the Fed's crucial role in stabilizing the economy through expansionary monetary policies. Impact on inflation and interest rates The Fed's expansionary measures, while aimed at stimulating economic growth, have had notable effects on inflation and interest rates. Following the quantitative easing in 2020, inflation in the United States reached * percent in 2022, the highest since 1991. However, by *************, inflation had declined to *** percent. Concurrently, the Federal Reserve implemented a series of interest rate hikes, with the rate peaking at **** percent in ***********, before the first rate cut since ************** occurred in **************. Financial implications for the Federal Reserve The expansion of the Fed's balance sheet and subsequent interest rate hikes have had significant financial implications. In 2023, the Fed reported a negative net income of ***** billion U.S. dollars, a stark contrast to the ***** billion U.S. dollars profit in 2022. This unprecedented shift was primarily due to rapidly rising interest rates, which caused the Fed's interest expenses to soar to over *** billion U.S. dollars in 2023. Despite this, the Fed's net interest income on securities acquired through open market operations reached a record high of ****** billion U.S. dollars in the same year.

Graph and download economic data for Overnight Reverse Repurchase Agreements: Treasury Securities Sold by the Federal Reserve in the Temporary Open Market Operations (RRPONTSYD) from 2003-02-07 to 2025-05-27 about reverse repos, overnight, trade, securities, Treasury, sales, and USA.

The inflation rate in the United States declined significantly between June 2022 and March 2025, despite rising inflationary pressures towards the end of 2024. The peak inflation rate was recorded in June 2022, at *** percent. In August 2023, the Federal Reserve's interest rate hit its highest level during the observed period, at **** percent, and remained unchanged until September 2024, when the Federal Reserve implemented its first rate cut since September 2021. By January 2025, the rate dropped to **** percent, signalling a shift in monetary policy. What is the Federal Reserve interest rate? The Federal Reserve interest rate, or the federal funds rate, is the rate at which banks and credit unions lend to and borrow from each other. It is one of the Federal Reserve's key tools for maintaining strong employment rates, stable prices, and reasonable interest rates. The rate is determined by the Federal Reserve and adjusted eight times a year, though it can be changed through emergency meetings during times of crisis. The Fed doesn't directly control the interest rate but sets a target rate. It then uses open market operations to influence rates toward this target. Ways of measuring inflation Inflation is typically measured using several methods, with the most common being the Consumer Price Index (CPI). The CPI tracks the price of a fixed basket of goods and services over time, providing a measure of the price changes consumers face. At the end of 2023, the CPI in the United States was ****** percent, up from ****** a year earlier. A more business-focused measure is the producer price index (PPI), which represents the costs of firms.

Abstract (en): The Federal Reserve implements its monetary policy by using open market operations in United States government securities to target the federal funds rate. A substantial decline in the stock of United States Treasury debt could interfere with the conduct of monetary policy, possibly forcing the Fed to rely more heavily on discount window lending or to conduct open market transactions in other types of securities. Either choice would cause the implementation of monetary policy to resemble the methods used by the Fed before World War II. This paper describes two things: (1) how the Fed implemented monetary policy before the war and (2) the conflicts that arose within the Fed over the allocation of private-sector credit when discount window loans and Fed purchases of private securities were a substantial component of Federal Reserve credit. Those conflicts help explain the Fed's failure to respond vigorously to the Great Depression. The experience suggests that a renewed reliance on the discount window or on open market operations in securities other than those issued by the United States Treasury could hamper the conduct of monetary policy if it leads to increased pressure on the Fed to affect the allocation of credit. The file submitted is 0205dwd.txt. These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator if further information is desired.

Graph and download economic data for Money Market Funds; Open Market Paper; Asset, Transactions (BOGZ1FA633069175A) from 1946 to 2024 about open market paper, MMMF, transactions, assets, and USA.

Graph and download economic data for Money Market Funds; Open Market Paper; Asset, Transactions (BOGZ1FA633069175Q) from Q4 1946 to Q4 2024 about open market paper, MMMF, transactions, assets, and USA.

The Federal Reserve's balance sheet ballooned following its announcement to carry out quantitative easing to increase the liquidity of U.S. banks in early 2020. The balance sheet continued to grow in the following period as well, with a downward trend in 2023. As of February 29, 2024, the Fed's balance sheet amounted to roughly 7.6 trillion U.S. dollars. The most drastic increase in the observed period took place in the first half of 2020. This measure was taken to increase the money supply and stimulate economic growth in the wake of the damage caused by the COVID-19 pandemic. The Federal Reserve was not the only institution that implemented an expansionary monetary policy in response to the pandemic. For instance, the European Central Bank expanded its money supply in March 2020 and kept doing so over the following months. How do central banks increase the amount of money in circulation? Central banks can increase the money circulating in the economy in many ways. For instance, they can decrease banks’ reserve requirements to stimulate lending or decrease the interest rates to reduce the cost of borrowing for commercial banks. Alternatively, central banks can engage in open market operations (OMO) and buy securities such as government bonds from commercial banks or institutions. By conducting open market operations, the Federal Reserve expanded its balance sheet by seven trillion U.S. dollars between 2007 and 2023. All these measures aim to increase bank loans to entrepreneurs and consumers in order to stimulate employment and economic growth. Impact of COVID-19 on the U.S. economy The COVID-19 pandemic had a tremendous impact on national economies worldwide, and the United States was no exception. During the early months of the crisis, many lost their jobs, mostly those in lower-income categories. As a consequence, many Americans found it difficult to pay their rent and cover basic household expenses. Furthermore, in April 2022, most small business owners claimed that the pandemic had a large or moderate negative effect on their businesses. Overall, the gross domestic product (GDP) of the United States decreased by roughly 2.2 percent in 2020. In the following years, however, it increased notably, surpassing 25 trillion U.S. dollars in 2022.

Graph and download economic data for Monetary Authority, Private Depository Institutions, and Money Market Funds; Open Market Paper; Asset, Transactions (BOGZ1FA843069175A) from 1946 to 2024 about open market paper, monetary authorities, MMMF, transactions, assets, private, and USA.

Graph and download economic data for Monetary Authority, Private Depository Institutions, and Money Market Funds; Open Market Paper; Asset, Transactions (BOGZ1FA843069175Q) from Q4 1946 to Q4 2024 about open market paper, monetary authorities, MMMF, transactions, assets, private, and USA.

Graph and download economic data for Private Depository Institutions and Money Market Funds; Open Market Paper; Asset, Transactions (BOGZ1FA783069175Q) from Q4 1946 to Q4 2024 about open market paper, MMMF, transactions, assets, private, and USA.

Graph and download economic data for Households; Money Market Fund Shares; Asset, Transactions (BOGZ1FA193034005A) from 1946 to 2024 about MMMF, transactions, assets, households, and USA.

Graph and download economic data for Money Market Funds; Bankers' Acceptances; Asset, Transactions (BOGZ1FA633069603A) from 1946 to 2024 about MMMF, transactions, assets, and USA.

Graph and download economic data for Money Market Funds; Unidentified Miscellaneous Assets (Net), Transactions (BOGZ1FA633093005Q) from Q4 1946 to Q4 2024 about MMMF, miscellaneous, transactions, assets, and USA.

Graph and download economic data for Money Market Funds; Floating NAV Total Financial Assets, Transactions (BOGZ1FA634090020Q) from Q4 1946 to Q4 2024 about MMMF, transactions, financial, assets, and USA.

Graph and download economic data for All Domestic Sectors; Money Market Fund Shares Held in Public Institutional Accounts (ICI); Asset, Transactions (BOGZ1FA883034010A) from 1946 to 2024 about MMMF, transactions, sector, domestic, assets, and USA.

Graph and download economic data for Mutual Funds; Commercial Paper; Asset, Transactions (BOGZ1FA653069100Q) from Q4 1946 to Q4 2024 about mutual funds, commercial paper, transactions, commercial, assets, and USA.

Graph and download economic data for Variable Annuity Money Market Funds; Total Financial Assets, Transactions (BOGZ1FA634090503A) from 1946 to 2024 about annuities, MMMF, transactions, assets, and USA.

Graph and download economic data for Money Market Funds; Unidentified Miscellaneous Assets (Net), Transactions (BOGZ1FA633093005A) from 1946 to 2024 about MMMF, miscellaneous, transactions, assets, and USA.