Federal Reserve and Monetary Policy Part 8 of 13
Thursday, October 29th, 2009Federal Reserve and Monetary Policy Part 8 of 13
Open Market Operations. The Feds primary monetary policy tool is open market operations, which is the buying and selling of U.S. government securities on the open market for the purpose of influencing short-term interest rates and the growth of the money and credit aggregates. Once the FOMC has established policy, the Federal Reserve Bank of New York implements the Feds open market Forex Trading Software that Works operations daily. Whenever an increase in the growth rate of the money supply and credit is needed to stimulate the economy, or downward pressure on short-term interest rates is desired, the Fed buys securities from brokers or dealers. Each transaction is handled electronically. Dealers send securities to the Fed over an electronic network, and the Fed adds money to the reserve accounts of the banks of the brokers or dealers. The banks, in turn, credit the accounts of the brokers and dealers, thereby increasing the amount of money and credit available in the market.
Whenever it is necessary to slow the growth of money and credit, this process works in reverse. The Fed sends securities to brokers and dealers electronically and takes payment by debiting the accounts of banks with which the brokers and dealers do business. These reserves The Best Forex Trading System Ever leave the banking system, thereby reducing the money supply and curtailing the expansion of credit.
