The Ample Reserves Regime

Limited Reserves Regime (LRR)

A monetary policy framework used by the Fed before 2008 to influence the Federal Funds Rate through Open Market Operations, Discount Rate, and Reserve Requirements.

Federal Funds Rate (FFR)

The interest rate at which banks lend reserves to each other overnight, targeted by the Fed to communicate monetary policy stance.

Quantitative Easing

A monetary policy where the Fed purchases large-scale assets to increase bank reserves after the 2008 recession.

Ample Reserves System

The monetary policy framework adopted by the Fed post-2008, using large reserves to influence the FFR.

Interest on Reserve Balances (IORB)

A primary tool used by the Fed, paying interest on reserves held at the Fed that helps steer the FFR.

Overnight Reverse Repurchase Agreement (ON RRP)

A supplementary tool where the Fed pays interest to non-bank institutions for lending reserves overnight, setting a floor on the FFR.

Discount Window

A facility allowing banks to borrow money from the Fed at the Discount Rate, providing a ceiling for the FFR.

Open Market Operations (OMO)

Purchases and sales of securities by the Fed to maintain ample reserves and influence the supply of reserves.

Expansionary Policy

Monetary policy implemented by the Fed when the economy weakens, lowering the target FFR to encourage borrowing and investment.

Contractionary Policy

A monetary policy approach used when inflation rises, raising the target FFR to discourage borrowing and spending.