subject: Banks and monetary policy: the mechanics of adjustment of interest rates [print this page] We heard a lot of interest not only in my field. Interest rates are everywhere in our daily life: credit card interest free, interest on deposits, interest auto loans, the interest of a personal loan, interest bond. Recently I received an e-mail spam, and said, "You need new socks? Executing our family loans low interest rates." Since I am single and have fifty pairs of socks seem to beFavorite Christmas in My House I chose to press the "click here" button. But what exactly are the mechanisms for setting interest rates? Who decides on the disposal of interests, which and how?
Paul Volcker, then Chairman of the Board of Governors of the Federal Reserve System (1979-87), was often the second most powerful man in the United States. Volcker issued the "double-recession" dip "of 1979/80 and 1981/82, beating the double-digit inflation1979/80 and the rate of unemployment in double digits for the first time since 1940. Volcker then declared victory over inflation and guided the economy through the boom in 1980, the result that the unemployment rate below 5.5 percent, half a point less than in 1978-79 and the rise of Ronald Reagan to help convert the American people Reaganomics. Volcker is powerful because it is monetary policy. Central banks around the world are powerful for the same reason, even though fewindependent of their governments when the Congress of the Fed and the White House. The actions of the central bank's actions are the most important issues, the economic activity from quarter to quarter or year to year.
Monetary policies are part of the technical requirements of macroeconomic policy. They work to promote or prevent spending on goods and services. The global economic recession and booms reflect fluctuations in aggregate demand, not the productive capacity of the economy. Monetary The humidity is politics, perhaps even to eliminate these fluctuations. This is not an instrument at hand to offer. Central banks do not have any influence on the productivity of the handle and real economic growth. A central bank is the bank "banker". Guests at the Federal Reserve Bank are not ordinary citizens but "banks" in the broad sense of all depository institutions, banks, savings banks, savings banks and credit unions. You can keep the deposits and loans from the FederalReserve System and are subject to minimum reserves by the Fed and other provisions. The same relationship exists in Italy between the Bank of Canada and the individual banks.
Banks are required to verify the reserves amount to at least maintain some percentage of their deposits. Compliance requirements are revised periodically every two weeks for banks that do most of the deposits. The tests provided the backbone of monetary policy. Banks need "federalFunds (in cash or deposits with the Federal Reserve System) to complete the test successfully and the Federal Reserve controls the supply. When the Fed buys securities from banks or their depositors with base money, banks acquire reserve balances. Even the Fed's reserve holdings by selling government bonds. It's open market operations, the major modus operandi of monetary policy. A bank can borrow reserve funds Reserve balances on bank loans' from Fedfor one day at a time when the federal funds market. Interest rates on these loans are constantly quoted. Open market operations are the operations of the central bank in this market. Banks can borrow from the Federal Reserve Bank has given the discount rate. Adjusting the discount rate is another instrument of policy by central banks. Today, it is secondary to the opening of trading and the Fed generally keeps the discount rate include the federal funds market.But in the announcement of a new discount rate is often a good way, a message, send the markets.
