Monetary Policy of the FED during the Economic Crisis Essay

Monetary Policy of the federal official during the Economic Crisis - Essay Exampleet trading operations by engaging in aggressive secure of exchequer securities and in December 2008, they extended the operations to the purchase of agency debt and mortgage-backed securities. By the end of 2008, the ply describe to have purchased agency mortgages backed securities worth US $1.25 trillion, and it increased its purchase of agency debt by up to US$ 200 billion. Thirdly, by mid 2009, the provide had purchased long-term treasury securities worth US $ terzetto hundred billion in order to improve the level of liquidity in private conviction food markets (Brezina, 123-127). The go out of the open market operations is demonstrated in the chart below, which show that increase in the purchase of securities resulted in the increase of cash supply in the U.S economy. Figure Impact of open market operations grant requirement In the writings by Timberlake, he stated that the reserve require ment is a method of credit admit that is normally applied by the FED to control the property market by determining the level of cash that is available within the economy (89-95). The reserve requirement draws its buttocks from the fact that technical banks keep cash reserves with the FED and then this reserve is maintained for the endeavor of liquidity and for providing the means for credit control. Brezina stated that as a way of responding to the sparing crisis between 2007 and 2009, the FED through the reserve requirement policy decreased the minimum reserve ratio that all commercialized bank and other financial institutions offering the service of deposit taking keep at the FEDs reserve (198-202). This action was aimed at increasing the power of credit creation by the commercial banks so that the ordinary economy can access more credit and therefore, plunge out of the economic recession. Discount rate According... This paper presents a comprehensive analysis of the monet ary policy of the national Reserve System, carried out to mitigate the negative impacts of the financial crisis and to restore the economic growth in the United States. The three monetary policies are discussed and they are deemed effective in ensuring the increase in the circulation of money in the general economy, thereby resolving the liquidity crisis and facilitating more economic activities to continue or kick-start. One of the key functions of the Federal Reserve Bank (FED) is the regulation of currency or credit in order to reflect the require of the business community and the general economy and for the purpose of carrying out the broad monetary policy follow by the U.S government. Monetary policy is the action of a Central Bank, which influences the size and rate of growth of the money supply.The open market operations as the purchase or the sale of securities that include long-term and short-run in the open market by the FED. The reserve requirement is a method of cred it control that is normally applied by the FED to control the money market by determining the level of cash that is available within the economy. The discount rate is the rate at which the FED normally discounts the first off class bills or will advance loans to commercial banks. This discount rate affects the cost and availability of credit and in particular, a change in the rate of the discount leads to a corresponding change in the money market rate