Authors: Alexander Kroeger, John P. McGowan, and Asani Sarkar
-
-
The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
Do you have a request for information and records? Learn how to submit it.
Learn about the history of the New York Fed and central banking in the United States through articles, speeches, photos and video.
-
-
-
The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry.
Need to file a report with the New York Fed? Here are all of the forms, instructions and other information related to regulatory and statistical reporting in one spot.
The New York Fed works to protect consumers as well as provides information and resources on how to avoid and report specific scams.
-
-
-
The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
The growing role of nonbank financial institutions, or NBFIs, in U.S. financial markets is a transformational trend with implications for monetary policy and financial stability.
The New York Fed offers the Central Banking Seminar and several specialized courses for central bankers and financial supervisors.
-
-
-
We are connecting emerging solutions with funding in three areas—health, household financial stability, and climate—to improve life for underserved communities. Learn more by reading our strategy.
The Economic Inequality & Equitable Growth hub is a collection of research, analysis and convenings to help better understand economic inequality.
The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry.
-
Economic Policy Review
The Pre-Crisis Monetary Policy Implementation Framework
Volume 24, Number 2
October 2018
October 2018
JEL classification: E4, E5, N1
This article describes the Federal Reserve’s (“the Fed’s”) operating framework for monetary policy prior to the expansion of the Fed’s balance sheet during the financial crisis. To implement the Fed’s mandate of promoting price stability consistent with full employment, the Federal Open Market Committee (FOMC) sets a target for the overnight rate in the federal funds market, where banks trade reserve balances. In the pre-crisis framework, aggregate reserves were scarce, so relatively small changes in the level of reserves would affect rates in the fed funds market. The Federal Reserve Bank of New York’s Open Market Trading Desk (“the Desk”) forecasted the demand for and supply of reserves on a daily basis, and then conducted repo operations with primary dealers with the objective of supplying enough reserves to maintain the equilibrium rate close to its target. The Desk was successful in achieving this objective, since the fed funds rate generally did remain close to its target, and any deviations were quickly corrected. However, the pre-crisis operating procedures deployed by the Desk were more complex and opaque than alternative operating frameworks, required substantial intraday overdrafts from the Fed to meet banks’ short-term payment needs, and had to be abandoned once the Fed’s balance sheet expanded in response to the financial crisis. Since the crisis, the Desk has successfully controlled the policy rate using a new framework, suggesting that effective monetary control may be achieved through different frameworks.
Author Disclosure Statement(s)
Alexander Kroeger
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.
John McGowan
I declare that I have no relevant or material financial interests that relate to the research described in this paper.
Asani Sarkar
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.
John McGowan
I declare that I have no relevant or material financial interests that relate to the research described in this paper.
Asani Sarkar
The author declares that he has no relevant or material financial interests that relate to the research described in this paper.
By continuing to use our site, you agree to our Terms of Use and Privacy Statement. You can learn more about how we use cookies by reviewing our Privacy Statement. 
