Distributed by the Government of Canada Depository Services Program.
|Series||Working paper -- 97-8, Working paper (Bank of Canada) -- 97-8.|
|Contributions||Bank of Canada.|
|The Physical Object|
|Pagination||15 p. ;|
|Number of Pages||15|
Monetary policy can be implemented effectively without reserve requirements as long as cost incentives ensure a predictable demand for settlement balances. A central bank can then achieve the level of short-term interest rates that it desires, using market-oriented instruments by: The FOMC has stated that it intends to continue implementing monetary policy in a regime with an ample supply of reserves. 1 This Note, the first in a three-part series, provides an introductory discussion of what it means to implement policy in such a regime and how the Fed ensures interest rate control in an environment with an ample supply of reserves in the banking system. CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): Monetary policy can be implemented effectively without reserve requirements as long as cost incentives ensure a predictable demand for settlement balances. A central bank can then achieve the level of short-term interest rates that it desires, using market-oriented instruments only. Implementation of monetary policy in a regime with zero reserve requirements 1 1 Introduction and summary Monetary policy can be implemented effectively with zero reserve requirements. A number of countries now have no requirement, such as Australia, Belgium, Canada, Sweden and the United Kingdom. In others, including the United States and.
Methods of monetary policy implementation continue to change. The level of reserve supply— scarce, abundant, or somewhere in between—has implications for the efficiency and effectiveness of an implementation regime. The money market events of September highlight the need for an analytical framework to better understand implementation. This spirit of continual learning is a core value at the Federal Reserve, and that has been particularly important in recent years as the Fed has been operating in a new monetary policy implementation regime. 1. I last had the pleasure of speaking about monetary policy implementation at this forum two years ago. The Federal Reserve has made the following decisions to implement the monetary policy stance announced by the Federal Open Market Committee in its statement on Ma The Board of Governors of the Federal Reserve System voted unanimously to set the interest rate paid on required and excess reserve balances at percent, effective. February The Fed's "Ample-Reserves" Approach to Implementing Monetary Policy. Jane Ihrig, Zeynep Senyuz, and Gretchen C. Weinbach. Abstract: We describe the Federal Reserve's (the Fed's) approach to implementing monetary policy in an ample-reserves regime.
The Federal Reserve swiftly took a series of policy actions to address these developments. The FOMC announced it would purchase Treasury securities and agency MBS in the amounts needed to ensure smooth market functioning and the effective transmission of monetary policy . For many years, reserve requirements played a central role in the implementation of monetary policy by creating a stable demand for reserves. In January , the FOMC announced its intention to implement monetary policy in an ample reserves regime. Reserve requirements do not play a significant role in this operating framework. The Fed also cut reserve requirements for thousands of banks to zero. In addition, in a global coordinated move by centrals banks, the Fed said . We characterized the monetary framework of the Bank of England (BoE), the U.S. Federal Reserve (Fed), the European Central Bank (ECB), and the Swiss National Bank (SNB) focusing on i) the role of reserve requirements, ii) the conduct of open market operations, iii) standing facilities, and iv) the implementation of the central bank’s policy rate.