The Federal Reserve System USI联邦储备系统的使用.pptVIP

The portfolio decision is the choice of how (where) to hold idle funds. People do not hold all their idle funds in transactions accounts or cash. The Fed’s open-market operation focus on the portfolio choices people make. The Fed attempts to influence the choice by making bonds more or less attractive, as circumstances warrant. When the Fed buys bonds from the public, it increases the flow of deposits (reserves) to the banking system. Bond sales by the Fed reduce the flow. Likewise, when the Fed sells bonds, it removes money from the banking system. Open market operations Fed BUYS bonds Buyers spend account balances Sellers deposit bond proceeds Banks The Fed Fed SELLS bonds Reserves decrease Reserves increase The Public Not all of us buy and sell bonds, but a lot of consumers and corporations do. A bond is a certificate acknowledging a debt and the amount of interest to be paid each year until repayment. It is nothing more than an IOU. The current yield paid on a bond is the rate of return on a bond. It is the annual interest payment divided by the bond’s price. A principal objective of Federal Reserve open market activity is to alter the price of bonds, and therewith their yields. The less you pay for a bond, the higher its yield. Federal Reserve open-market activity alters the price of bonds, and their yields. By doing so, the Fed makes bonds a more or less attractive alternative to holding money. Open market operations are Federal Reserve purchases and sales of government bonds for the purpose of altering bank reserves. If the Fed offers to pay a higher price for bonds, it will effectively lower bond yields and market interest rates. By buying bonds, the Fed increases bank reserves. Federal Open Market Committee Regional Federal Reserve bank Private bank Step 2: Bond seller deposits Fed check Step 3: Bank deposits check at Fed bank, as a reserve credit Public Step 1: FOMC purchases government bonds; pays for bonds with Federal Reserve check Fed funds rate act