Are The Federal Funds Rate Increases Slowing The Economy?

The Committee intends to gradually reduce the Federal Reserve's securities holdings by decreasing its reinvestment of the principal payments it receives from the securities held in the System Open Market Account. Specifically, such payments will be reinvested only to the extent that they exceed gradually rising caps. Initially, these caps will be set at relatively low levels to limit the volume of securities that private investors will have to absorb. The Committee currently expects that, provided the economy evolves broadly as anticipated, it will likely begin to implement the program this year.

Once we start to reduce our reinvestments, our securities holdings will gradually decline, as will the supply of reserve balances in the banking system. The longer-run normal level of reserve balances will depend on a number of as-yet-unknown factors, including the banking system's future demand for reserves and the Committee's future decisions about how to implement monetary policy most efficiently and effectively. The Committee currently anticipates reducing the quantity of reserve balances to a level that is appreciably below recent levels but larger than before the financial crisis.

Finally, the Committee affirmed in June that changing the target range for the federal funds rate is our primary means of adjusting the stance of monetary policy. In other words, we do not intend to use the balance sheet as an active tool for monetary policy in normal times. However, the Committee would be prepared to resume reinvestments if a material deterioration in the economic outlook were to warrant a sizable reduction in the federal funds rate. More generally, the Committee would be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate.

Trending Hairstyles

Source :

Are The Federal Funds Rate Increases Slowing The Economy?
Fed Slows Down on Plans to Pursue Interest Rate Increases
Fed's Yellen says economy steady enough for more hikes, bond wind down
Fed Chair Janet Yellen: U.S. Economy Is ‘Healthy Enough’ for Gradual Interest Rate Hikes
Will Rising Interest Rates Be Bad for Main Street?
Janet Yellen Speech Full Text: Fed Chair Says Interest Rate Increase ‘Will Not Be As Slow’ As In 2015 And 2016
Q&A: How a key Fed interest rate affects the economy
Yellen: 'Gradual' Rate Increases Will Be Needed to Sustain Economic Expansion -Update
Are The Federal Funds Rate Increases Slowing The Economy?