CRS – Monetary Policy and the Federal Reserve: Current Policy and Conditions, Marc Labonte, Specialist in Macroeconomic Policy, July 6, 2012
Traditionally, the Fed has three means for achieving its goals: open market operations involving the purchase and sale of U.S. Treasury securities, the discount rate charged to banks who borrow from the Fed, and reserve requirements that governed vault cash or deposits with the Fed as a proportion of deposits. Historically, open market operations have been the primary means for executing monetary policy. Recently, in response to the financial crisis, direct lending became important once again and the Fed has created a number of new ways for injecting reserves, credit, and liquidity into the banking system, as well as making loans to firms that are not banks. As financial conditions normalized, direct lending tapered off. Emergency lending programs have been wound down, with the exception of foreign central bank liquidity swaps.”
