Chapter 16

Policy Implementation

2

A morning at the New York Fed The FOMC policy directive The Reserves Market and Open Market

Operations How the Demand and Supply of Reserve

s Are Calculated Trading Desk Market Techniques

3

A Morning at the New York Fed

The manager of the Fed’s System Open Market Account (SOMA) interprets and executes the policy directives of the Federal Open Market Committee (FOMC)

公开市场账户：联储账户，用于为了配合货币政策指令所要求的公开市场业务，在交易室买卖该账户中美元国债。government securities are bought and sold from the

SOMA to affect intermediate monetary targetsthe buy or sell orders are issued to securities traders

who work for the New York Fed

4

A Morning at the New York Fed

The Fed traders call primary dealers23 large banks and securities dealers with whom the

Fed deals directly

一级交易商：联储在公开市场上直接打交道的大银行和证券经销商。

The traders then meet to announce their buy or sell offer prices

The manager tells the traders to discharge the most profitable transactions up to the amounts that the Fed wishes to buy or sell

5

Who Are the Primary Dealers? Primary Dealers as of July 1, 2004

6

A Morning at the New York Fed

As the deals are consummated, reserves are either supplied or withdrawn from the banking system

The manager of SOMA then examines the effects of these changes on intermediate targets and decides if additional purchases or sales are needed

7

The FOMC Policy Directive

Once the long-term policy stance is set, the focus of the FOMC shifts to the immediate periodindicators of underlying economic and financial

conditions are examinedthe FOMC then devises short-term strategies

that are consistent with its longer-range projections

8

The FOMC Policy Directive

The FOMC issues a policy directive that guides the conduct of open market operations until the next FOMC meeting

政策指令：联邦公开市场委员会对纽约储备银行的交易室发布关于如何执行公开市场政策的操作指令，该指令到下一次联邦公开市场委员会举行会议之前一直有效。近年来，政策指令目标是联邦基金利率。the link between the decisions formulating

policy and the actions implementing policy

9

The FOMC Policy Directive

The policy directive is released along with a statement that communicates the Fed’s evaluation of the risks associated with regards to sustainable economic growth and price stability

Beginning in 1994, these policy directives are announced immediately following the FOMC meetingseliminates questions and doubts

10

The Reserves Market and Open Market Operations

To implement the policy directive, the Trading Desk of the New York Fed tries to manage reserve levels in the banking system so that the federal funds rate is equal to the targeted rateto do this the Trading Desk develops estimates

of the supply and demand for total reserves

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The Reserves Market and Open Market Operations

The demand for reserves consists ofthe demand for required reservesthe demand for excess reserves

The supply of reserves consists ofborrowed reserves

borrowed from the Fed’s discount facility

non-borrowed reservesavailable in the open market

12

Total ReservesTotal

Reserves Demanded

Total Reserve

Components=

Total Reserves Supplied

=

Buffer against check-clearing needs and other uncertainties

Excess Reserves

Required Reserves

Borrowed Reserves (discount window)

Nonborrowed Reserves

=

Deposits at the Fed

Vault Cash

=

Transaction's Reserve

Deposits Ratio

13

The Reserves Market and Open Market Operations

In recent years, the Fed has implemented policy by focusing its open market operations with an eye toward achieving the targeted federal funds rate

To follow the directive, the Trading Desk determines the reserve need

准备金需求：为保持政策指令要求的联邦基金利率而必须的准备金目标适量，通过公开市场操作来实现。the difference between actual reserves and those

projected to be needed to keep the federal funds rate at the desired level

14

The Reserves Market and Open Market Operations

Each day, the Fed updates its estimates of the supply of reserves and new information on the other factors affecting reservesusing this information, the manager revises his

estimates of the reserve need

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The Reserves Market and Open Market Operations

In recent years, required reserves have declined substantially and are continuing to declinethis is due to the widespread growth of retail sweep

accounts零售自动转存账户： 1994 年建立的零售账户，余额不进

入具有准备金要求的存款账户而进入那些没有准备金要求的储蓄账户。 “sweep” balances out of transactions accounts that are subject

to reserve requirements and into other deposit accounts that are not

first appeared in 1994

16

The Reserves Market and Open Market Operations

The significant decline in required reserves in recent years due to sweep accounts has raised concern that the fed funds rate may become more volatilemay affect the implementation of monetary

policy

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The Reserves Market and Open Market Operations

In recent years, Congress has considered authorizing the Fed to pay interest on reservesthe Fed has advocated that this would make the

banking system more efficientthe incentive to use sweep accounts would be

minimized

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How the Demand and Supply of Reserves Are Calculated

Banks are required to hold reserve assets for a two-week maintenance period

维持期：在该期间，银行被要求至少持有法定准备金数量的准备金。the actual amount of required reserve assets that

must be held is determined during the computation period

计算期：在该期间，要求银行计算维持其内所需准备金数量。

the average daily amount of required reserve assets that must be held is equal to the required reserve ratio times the average daily amount of deposits subject to reserve requirements

中国按旬考核。

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How the Demand and Supply of Reserves Are Calculated

Currently, only checkable deposits are subject to reserve requirements0% on transaction deposits up to $6.6 million3% on transaction deposits between $6.6

million and $45.4 million10% on transaction deposits over $45.4

million

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How the Demand and Supply of Reserves Are Calculated

Between 1984 and the end of July 1998, contemporaneous reserve accounting was used

无时差准备金记账法（同期准备金记账法）：维持期必须与计算器基本保持一致的记账制度。the computation period begins two days

before the maintenance period beginswhen one computation period ends, another

immediately begins

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How the Demand and Supply of Reserves Are Calculated

Beginning in July 1998, the system was changed to lagged reserve accounting

滞后准备金记账法 : 指维持期在计算期结束后才开始的准备金记账制度。the maintenance period begins 30 days after the

beginning of the computation periodwhen one computation period ends, another

immediately beginsthe change makes it easier for depository institutions

to calculate their required reserve balances for the current maintenance period

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How the Demand and Supply of Reserves Are Calculated

In addition, with lagged reserve accounting, the Trading Desk at the New York Fed can obtain more accurate information about required reserveshelpful in determining the overall demand for

reserves by the banking system

23

总准备金需求 = 法定准备金 + 超额准备金 总准备金供给 = 存款货币银行在央行的存款

+ 库存现金

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How the Demand and Supply of Reserves Are Calculated

The supply of reserves can be determined by rearranging the Fed’s balance sheet

25

How the Demand and Supply of Reserves Are Calculated

The major assets of the Fed includeGovernment securities held (GS)Gold and special drawing rights (SDRs)

accounts, which reflect international reserve holdings (IR)

Discount loans (L)Float (F)Other assets (OA)

26

How the Demand and Supply of Reserves Are Calculated

The major liabilities of the Fed includeReserve balances of depository institutions

with the Fed (DF)Currency outside the Fed (C*)Treasury deposits (TD)Other liabilities (OL)

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Trading Desk Market Techniques

Each day, the Fed must decide whether to buy or sell securities outright or on a temporary basisif bought or sold on a temporary basis, the

transaction is generally reversed within 2 weeks

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Outright Transactionsin the Market

In general, the Fed uses outright transactions when it wants to provide or absorb reserves over relatively long time spans

直接交易：在公开市场上买卖证券以增加或减少准备金供给。typically used when projections show that a reserve

need or reserve excess is likely to persistmost are conducted to meet seasonal and long-term

needs of the economy

29

Outright Transactionsin the Market

The Trading Desk makes more outright purchases than outright sales due to the growing demand for moneyoutright purchases still account for no more

than 10% of total Fed transactionshowever, the Fed’s portfolio of securities

consists mainly of those bought outright

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System Open Market Account (SOMA) Securities Holdings as of

July 21, 2004

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Temporary Transactions

The Trading desk uses temporary transactions when it wants to supply or absorb reserves for relatively short periodsthe need to conduct these transactions arises

from swings in the various factors that affect the supply of reserves

these transactions are cheaper than outright transactions

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Temporary Transactions

Two types of transactions are usedrepurchase agreementsreverse repurchase agreements

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Temporary Transactions

When arranging repurchase agreements, the Trading Desk buys securities on a self-reversing, temporary basisthe seller agrees to buy the securities back

from the Trading Desk on or before a specified date

34

Temporary Transactions

Since repurchase agreements provide reserves, they can be used to offset a temporary reserve draina repurchase agreement used to supply

reserves on a temporary basis is called a system repurchase agreement

系统回购协议 : 联储交易室暂时自反向买入证券，这种操作的目的是暂时增加准备金供给。

the purchased securities go into the Fed’s system account

35

Temporary Transactions

Reverse repurchasing agreements are arranged by the Trading Desk when the manager wants to drain reserves temporarily from the banking system

反向回购协议：联储卖出证券，成交的同时就约定在不久之后的某一天将证券购回，这种操作的目的是暂时减少准备金供给。the manager sells securities and

simultaneously purchases the same securities for delivery in the near future